Regional Parking Fee: A Potential Funding Source for Transit?
by
Jodie Mercer Misiak
BA in International Studies
The Johns Hopkins University, 2001
Submitted to the Department of Urban Studies and Planning
and to the Department of Civil and Environmental Engineering
in partial fulfillment of the requirements for the Degrees of
Master in City Planning
and
Master of Science in Transportation
at the
Massachusetts Institute of Technology
June 2005
ACHUSETTS
INSTiTUta
OF TECHNOLOGY
JUN 2 8 2005
LIBRARIES
©2005 Massachusett I stitute of Technology
All Rig t es4ved
Signature of Author
epartment of Urban Studies and Planning
Department of Civil and Environmental Engineering
May 19, 2005
Certified by
>711-
David Geltner
Professor of Real Estate Finance
Thesis Supervisor
Certified by_
Frederick Salvucci
Senior L eturer of Civil and Environmental Engineering
Thesis Supervisor
Accepted By
Dennis Frenchman
Chair, MCP Committee
Department of Urban Studies and Planning
4Accepted By
ROTCH
Andrew Whittle
Chair, Committee for Graduate Students
Department of Civil and Environmental Engineering
Regional Parking Fee: A Potential Funding Source for Transit?
by Jodie Mercer Misiak
Submitted to the Department of Urban Studies and Planning and to the Department of
Civil and Environmental Engineering on May 18, 2005, in partial
fulfillment of the requirements for the Degrees of
Master in City Planning and Master of Science in Transportation
ABSTRACT
From a regional mobility perspective, Chicagoland is in serious trouble. The current
Chicago Transit Authority (CTA) funding shortfall is just the most recent evidence of
major flaws in the region's transit governance and finance structures. Over the past two
decades, there have been numerous reasons and opportunities to modify the regional
approach to public transportation provision. Yet the Regional Transportation Authority
(RTA), the area's transit oversight entity, never initiated a critical re-evaluation of its
role.
Ideally, the central goal of the RTA would be to enable ample transport options
throughout the region. However, rather than fostering enhanced service and increased
ridership levels, the RTA funding process has resulted in performance declines and has
encouraged a divisive political environment. This is ultimately damaging to both the
economic health and the global competitiveness of the region.
Now, as Chicagoland faces a particularly severe budget crisis, it is time to finally begin
the discussion that should have commenced two decades ago. The region must alter its
approach to transit finance and an additional operations funding source must be identified
immediately. The implementation of a region-wide, non-residential parking fee could
help achieve both of these goals. When compared with the option of a sales tax increase,
the advantages of a parking fee include:
-
It would encourage a greater sense of regionalism
It would have a rational nexus to auto mode externalities
The statutory incidence would not be on the general public and the magnitude
would be minimal
It would serve as the impetus for a more merit-based approach to regional transit
finance
Thesis Supervisor: Frederick Salvucci
Title: Senior Lecture of Civil and Environmental Engineering
Thesis Supervisor: David Geltner
Title: Professor of Real Estate Finance
Acknowledgments
"Why CANDLES?" objected Daisy, frowning. She snapped them out with her
fingers. "In two weeks it'll be the longest day in the year." She looked at us all
radiantly. "Do you always watch for the longest day of the year and then miss it? I
always watch for the longest day in the year and then miss it."
Anticipation is a dangerous thing; it is all too easy to spend valuable time
watching for the next BIG moment. In high school, we look forward to the glorious
freedom of college. In college, we look forward to the instant when we are finally
taken seriously as adults. For those of us in graduate school, it is tempting to
spend every waking moment looking forward to thesis completion and the
beginning of our careers. But as we wait for the ultimate justification of our hard
work, we risk missing the things that make the graduate experience so enjoyable.
For me, these have included...
My wonderful team of advisors: David Geltner, Mikel Murga, and Fred Salvucci. I
can't imagine a more perfect combination of minds and personalities. Research
meetings were always enlightening.. .and thoroughly terrifying. Hours spent
enthralled by their ideas on transportation, finance, land-use, and politics would
then be followed by the horrifying thought, "How do I fit it all in my thesis?"
My sponsors: The Department of Urban Studies & Planning and the Department
of Civil & Environmental Engineering provided generous financial support
throughout my stay at MIT, thus lifting a tremendous burden off my shoulders.
During the thesis year, the Chicago Transit Authority provided both financial
support and the opportunity to help solve a truly fascinating problem.
The Chicago Transit Authority: Frank Kruesi and his dedicated team of
professional, including but certainly not limited to: Jeff Busby, Michael Connelly,
Paul Fish, Linda Fuller, Jason Lee, Mark Patzloff, Jeff Sriver
I thank them for creating an ideal research setting during my stay in Chicago and
for providing technical support once I returned to Boston.
As I explored the wonderful world of parking, valuable information was provided
by the following individuals: George Brown, Richard Dye, Damian Kulash, and
Donald Shoup
The people of MIT: The organizers and members of the Transit Group, for
creating such a rich research environment. My officemates, for putting up with
the frequent cries of distress (and of joy) coming from my corner of the room. Ed
Holzwarth, for starting the mapping efforts. Carl Martland and the members of the
1.011 classes of 2004 & 2005, for introducing me to an abundance of potential
case studies and for teaching me the importance of clear, simple explanation.
And, of course, Ginny Siggia, for helping to keep all the plates spinning.
My parents, who always set the highest standards of dedication and integrity.
From them I learned that the pursuit of excellence should always be enjoyed.
"We ought to plan something," yawned Miss Baker, sitting down at the table as if
she were getting into bed.
"Allright," said Daisy. "What'll we plan?" She turned to me helplessly: "What do
people plan?"
Finally, thanks to the very patient Michael Hickin for helping me plan, both for the
longest day of the year and beyond....
* Quotes courtesy of Fitzgerald, F. Scott. "The Great Gatsby," 1925
Table of Contents
I
INTRODUCTION
1.1
Objectives
12
12
1.2
Motivation
1.2.1 The Benefits of A Healthy Regional Transit Network
1.2.2 Transit Operations Finance
1.2.3 The Chicagoland Case
1.2.4 Prior Research
12
12
14
17
24
1.3
Methodology
1.3.1
Identifying Solutions: A True Regional Mentality
1.3.2 Common Misperceptions of a Parking Fee
1.3.3 Incidence & Magnitude: Property Level Impact
1.3.4 Implementation Challenges
25
25
25
26
27
1.4
Overview of Report Structure
28
1.5
Chapter Summary
29
2
REGIONAL TRANSIT FINANCE: IDENTIFYING THE PROBLEMS
30
2.1
Background on the Budget Crisis
2.1.1 An Historical Overview of the CTA's Operating Budget
2.1.2 The Suburban Perspective
2.1.3 Continued Tensions
30
30
37
38
2.2
The Current Budget
2.2.1 What are the Alternatives?
2.2.2 The Efficiency Question: Is the Doomsday Scenario Really Necessary?
40
42
44
2.3
Chapter Summary
45
3 IDENTIFYING SOLUTIONS: A TRUE REGIONAL MENTALITY
47
3.1
Regional Trends in Metro Chicago
47
3.2
Potential Regional Cooperation
50
3.3
Regional Transportation Planning: Modes and Land Use
50
3.4
3.5
Justifications for Regional Cooperation
3.4.1 Efficiency
3.4.2 Equity/Redistribution
3.4.3 Interdependence
3.6
Regionalism: Translation to Transit Finance Policy
The Common Goal: Enlarging the Funding Pool
3.6.1 Benefits of a new dedicated funding source
3.6.2 Funding Option: Increasing Collar County Sales Tax Rates
53
53
53
54
60
61
61
62
Funding Alternative: Regional Parking Fee
3.6.3
Chapter Summary
3.7
4 GENERAL MISCONCEPTIONS
68
69
Misconception: The Fee Will Have the Greatest Impact on the Collar Counties
Confusion Between Existing Parking Taxes and the Parking Fee
4.1.1
4.1.2 County-Level Impacts of Parking Fee
4.1.3 Comparison with Sales Tax
69
69
73
76
4.2
Misconception: The Fee Will Force Economic Activity to Locate Elsewhere
Potential Counter-forces
4.2.1
4.2.2 Guaranteed Counter-force: The Case for a Minimal, Regional Fee
78
78
79
4.3
Misconception: Roadway Improvement Is Better Regional Use of Funds
Reinforces Silo Mentality
4.3.1
4.3.2 Long-run Implications of Roadway Expansions
4.3.3 Additional Negative Impacts of Roadway Construction
82
84
84
86
4.1
4.4 Misconception: Parking Fee is Primarily a Travel Demand Management Tool
Pricing Can Have An Impact
4.4.1
4.4.2 Options, Not Penalties
Chapter Summary
4.5
5 INCIDENCE & MAGNITUDE
87
87
88
90
91
5.1
Theoretical Approach
Can the Owner Successfully Pass the Cost Along?
5.1.1
5.1.2 What are the Long-Run Market Effects?
91
91
94
5.2
The
5.2.1
5.2.2
5.2.3
5.2.4
Magnitude of Additional Cost
Urban Core Facilities: For-Profit Providers
Chicago Retail - Urban Fringe
Collar County Office Building
Suburban Retail Center
96
97
102
106
109
5.3
Future Developers of Parking Facilities
115
5.4
Chapter Summary
117
6 IMPLEMENTATION CHALLENGES & STRATEGIES
6.1
Legal
Fee versus Tax
6.1.1
Relationship to Impact Fee
6.1.2
6.1.3 Legal Implications
6.1.4 Illinois Specific Legislation
6.1.5 Potential Legal Argument: Externalities of Greenfield Commercial Development
6.1.6 Vehicle Purchase Cost
6.2
Political
118
118
118
119
119
121
121
125
130
6.2.1
6.3
Use Existing RTA Formula
Institutional
6.3.1 RTA Responsibilities & Structure
6.3.2 Cost of Implementation
6.4
Chapter Summary
7 CONCLUSION
7.1
7.2
Summary of Ideas
7.1.1 Reframe transit as a regional concern
7.1.2 Identify the most appropriate strategy
7.1.3 Anticipate and Counter Basic Misperceptions
7.1.4 Understand the Actual Impacts: Incidence & Magnitude
7.1.5 Prepare Logistical Strategies
Regional Momentum: Beyond the First Steps
130
136
136
137
138
139
139
139
139
140
141
142
143
7.3
Applicability to Other Transit Properties
7.3.1 Massachusetts Bay Transportation Authority (MBTA)
7.3.2 Transport for London (TfL)
144
145
145
7.4
Future Research
7.4.1 Fees - How High is Too High?
7.4.2 Impact of Suburban Commercial Location
7.4.3 Explore the Impacts of Transportation Funding
7.4.4 Monitor Actual Impacts
145
145
146
146
146
FREQUENTLY USED ABBREVIATIONS
148
BIBLIOGRAPHY
149
APPENDICES
155
Figures
FIGURE 1.2.1: AVAILABLE LANE-MILES PER 1,000 VEHICLE MILES TRAVELED (TTI)............. 13
FIGURE 1.2.2: MAJOR CHICAGO AREA EXPRESSWAYS AND DATE OF CONSTRUCTION (CATS
15
M P O ) ..........................................................................................................................................................
FIGURE 1.2.3: 2002 NATIONAL TRANSIT OPERATING FUNDING SOURCES (APTA)................16
18
FIGURE 1.2.4: REGIONAL POPULATION GROWTH, 1983-2002 (TTI)..............................................
.......... 19
FIGURE 1.2.5: REGIONAL GROWTH IN NUMBER OF HOUSEHOLDS, 1980-2000 ....
FIGURE 1.2.6: NATIONAL TREND OF FEMALE WORKFORCE PARTICIPATION (US
19
D E PA RT M EN T O F L A B O R )..................................................................................................................
FIGURE 1.2.7: CHICAGOLAND WORKER FLOWS BETWEEN COOK AND COLLAR COUNTIES,
20
2000 (MCGUCKIN & SRINIVASAN, 2003)..........................................
...... 21
...................
FIGURE 1.2.8: COOK COUNTY MODAL SPLIT (US CENSUS, 2000)
FIGURE 1.2.9: CHICAGOLAND REGIONAL RIDERSHIP DECLINES, 1980-2004 (CTA)...............22
FIGURE 1.2.10: COMPARISON OF PARATRANSIT EXPENSES AND FEDERAL OPERATING
23
A SSIST A N C E , 1985-2005 (C T A ) ...........................................................................................................
..... 32
.....................
FIGURE 2.1.1: 85% SALES TAX DISTRIBUTION FORMULA (RTA)
FIGURE 2.1.2: CTA HISTORICAL OPERATING FUNDING (HOUSE COMMITTEE ON MASS
33
T R A N S IT, 2 0 0 4 ) .......................................................................................................................................
34
FIGURE 2.1.3: DISTRIBUTION OF 15% DISCRETIONARY FUNDING (CTA) .................................
FIGURE 2.1.4: COMPARISON OF 85% SALES TAX COMPONENT OF OPERATING FUNDS IN 1985
...... 35
...................
DOLLARS (HOUSE COMMITTED ON MASS TRANSIT, 2004)
.............. 36
FIGURE 2.1.5: 2005 PUBLIC FUNDING SCENARIOS FOR CTA & METRA (CTA)
FIGURE 2.2.1: POLITICAL COMMENTARY ON THE RECENT CTA FUNDING CRISIS, CHICAGO
41
TRIBU N E, MO N D A Y A PRIL 18, 2005 ............................................................................................
FIGURE 3.1.1: ABSOLUTE POPULATION CHANGE VALUES AT THE MUNICIPALITY LEVEL,
48
19 9 0 -2 0 0 0 (U S C EN S U S ) ........................................................................................................................
FIGURE 3.1.2: PERCENT POPULATION CHANGE AT THE MUNICIPALITY LEVEL, 1990-2000 (US
49
CE N S U S ) ...................................................................................................................................................
FIGURE 3.4.1: ABSOLUTE CHANGE IN AVERAGE AUTOMOBILE WORK COMMUTE TIME BY
57
DESTINATION M UNICIPALITY (US CENSUS) ...........................................................................
FIGURE 3.4.2: ABSOLUTE CHANGE IN AVERAGE AUTOMOBILE WORK COMMUTE TIME BY
.... 57
........................................
ORIGIN MUNICIPALITY (US CENSUS)
FIGURE 4.2.1: LOCATION OF SCHAUMBURG, THE REGION'S SECOND LARGEST
EMPLOYMENT CENTER. THE CITY IS AT LEAST 25 MILES WITHIN THE BOUNDARY OF
THE PARKING FEE IMPLEMENTATION AREA. BUSINESS MOVEMENT ACROSS SUCH A
80
LA R G E D ISTA N C E IS U N LIKELY . .....................................................................................................
FIGURE 4.3.1: A COMPARISON OF THE CHICAGO REGION'S AVAILABLE LANE MILES AND
83
ANNUAL LEVELS OF VEHICLE MILES TRAVELED (VMT). (TTI) ...........................................
FIGURE 4.3.2: A COMPARISON OF ANNUAL ROADWAY INFRASTRUCTURE EXPANSION
RATES AND ANNUAL INCREASES IN VEHICLE MILES TRAVELED (VMT) WITHIN THE
84
C H IC A G O RE G IO N . (TT I) .....................................................................................................................
FIGURE 4.3.3: CONGESTION AS POLICY DRIVER (ADAPTED FROM JARA-DIAZ, 2003)......85
FIGURE 4.4.1: PARKING TAX IMPACTS FLOWCHART (INTERVISTAS CONSULTING, INC. FOR
V A N CO U V E R T R A N SL IN K )................................................................................................................88
FIGURE 5.2.1: COST BREAKDOWN FOR CBD COMMERCIAL GARAGE, ASSUMING A $9
100
M O N T H L Y PA R K IN G F E E ..................................................................................................................
FIGURE 5.3.1: IMPACT OF ENHANCED TRANSIT SERVICE WHEN PROPERTY SUPPLY IS
116
R E L A T IV E LY IN E L A ST IC ..................................................................................................................
FIGURE 5.3.2: IMPACT OF ENHANCED TRANSIT SERVICE WHEN PROPERTY SUPPLY IS
1 16
R E L A T IV E L Y E L A ST IC ......................................................................................................................
FIGURE 6.1.1: COMPARISON BETWEEN CHICAGOLAND AVAILABLE ROADWAY CAPACITY
.............
............................. 125
AND VEHICLE MILES TRAVELED (TTI)
FIGURE 6.1.2: COMMUTE MODE SPLIT BY COUNTY OF DESTINATION (2000 US CENSUS) ...127
FIGURE 6.1.3: COMMUTE MODE SPLIT BY TOWN/CITY OF DESTINATION (US CENSUS, 2000)
- .. . -----------------------------------------............................... 12 8
..........................................................................FIGURE 6.1.4: COMMUTE MODE SPLIT BY TRANSPORTATION ANALYSIS ZONE OF
DESTINATION - FOCUS ON CHICAGO'S LOOP AREA (US CENSUS, 2000).........................129
Tables
TABLE 2.1.3-1: THE TWO 2005 CTA BUDGETARY SCENARIOS (CTA PROPOSED 2005 ANNUAL
40
B U D G E T SU M M A R Y)............................................................................................................................
TABLE 3.4.3-1: VERY LONG COMMUTES AS SHARE OF CHICAGOLAND TOTAL COMMUTES
58
(M CG U CK IN & SRIN IV A SA N , 2003)...............................................................................................
TABLE 3.4.3-2: VERY SHORT COMMUTES AS SHARE OF CHICAGOLAND TOTAL COMMUTES
58
(M CG U CK IN & SRIN IV A SA N , 2003) .............................................................................................
TABLE 3.4.3-3: TRAVEL TIME INDEX COMPARISON, HIGHEST SEVEN MUNICIPAL AREAS IN
59
19 8 3 (TT I, 2 0 0 5 ) ......................................................................................................................................
TABLE 3.4.3-4: TRAVEL TIME INDEX COMPARISON, HIGHEST SEVEN MUNICIPAL AREAS IN
60
2 0 0 3 (T T I) ..................................................................................................................................................
TABLE 3.6.2-1: REVENUE GENERATION POTENTIAL OF VARIOUS SALES TAX INCREASE
.... 63
...........................................
SCENARIOS (KIRSCHBAUM, 2004)
TABLE 3.6.3-1: CITY OF CHICAGO PARKING SUPPLY ESTIMATES (CTA).................................64
TABLE 3.6.3-2: CHICAGO AREA SUBURBAN PARKING SPACE SUPPLY ESTIMATES (CTA).....65
TABLE 3.6.3-3: COMMUTE JOURNEY TO WORK BY DRIVING MODE AND PLACE OF
66
EM PLOY M EN T (2000 U S CEN SU S)...............................................................................................
DRIVING
ON
BASED
ESTIMATIONS
REQUIREMENT
PARKING
TABLE 3.6.3-4: SUBURBAN
66
M OD E AN D PLA CE OF EM PLOY M ENT.......................................................................................
TABLE 3.6.3-5: RANGE OF POTENTIAL ANNUAL PARKING FEE REVENUES, BASED ON
..... 67
......................................
MONTHLY PER SPACE RATES OF $3-$9
............... 69
TABLE 4.1.1-1: COOK COUNTY PARKING TAX RATES (KIRSCHBAUM, 2004)
TABLE 4.1.1-2: CITY OF CHICAGO PARKING TAX RATES (KIRSCHBAUM, 2004).....................69
TABLE 4.1.1-3: QUALITATIVE COMPARISON BETWEEN EXISTING PARKING TAXES AND
71
PO T EN T IA L PA RK IN G FE E ..................................................................................................................
TABLE 4.1.1-4: ESTIMATE OF COOK COUNTY COMMERCIAL PARKING SPACE SUPPLY.
BASED ON 2003 REVENUES OF $33.6 MILLION AND EQUAL CATEGORY SHARE.............72
TABLE 4.1.1-5: UPPER BOUND ESTIMATE OF COOK COUNTY COMMERCIAL PARKING SPACE
SUPPLY, BASED ON 2003 REVENUES OF $33.6 MILLION AND MONTHLY PARKING
72
D O M IN A N CE ...........................................................................................................................................
ANNUAL
TO
GENERATE
NEEDED
FEE
CONTRIBUTIONS
PARKING
TABLE 4.1.3-1: COUNTY
TOTAL REVENUES OF $128,746,000..............................................76
TABLE 4.2.2-1: RANGE OF MONTHLY PER-SPACE RATES REQUIRED IF FEE IS APPLIED ON A
81
M O RE LIM ITED CITY W ID E SCA LE ..............................................................................................
TABLE 4.2.2-2: RANGE OF MONTHLY PER-SPACE RATES REQUIRED IF FEE IS APPLIED ON
81
RE G IO N A L S CA L E .................................................................................................................................
97
TABLE 5.2.1-1: COOK COUN TY PARKING TAX..................................................................................
98
TABLE 5.2.1-2: CITY OF CHICAGO PARKING TAX .............................................................................
FEE
PARKING
WITHOUT
STRUCTURE
COST
GARAGE
COMMERCIAL
URBAN
TABLE 5.2.1-3:
99
.....................................................................................................................................................................
TABLE 5.2.1-4: URBAN COMMERCIAL GARAGE COST STRUCTURE WITH $3 PER SPACE
99
M O N T H L Y F E E .......................................................................................................................................
TABLE 5.2.1-5: RANGE OF IMPACTS ON URBAN COMMERCIAL GARAGE (PROPERTY LEVEL)
10 0
...................................................................................................................................................................
TABLE 5.2.1-6: RANGE OF IMPACTS ON URBAN COMMERCIAL GARAGE (PROPERTY LEVEL)
...................................................................................................................................................................
TABLE
TABLE
TABLE
TABLE
TABLE
5.2.2-1:
5.2.2-2:
5.2.2-3:
5.2.2-4:
5.2.2-5:
10 1
.................. 103
URBAN FRINGE RETAIL PROPERTY COST STRUCTURE
LEVEL)..........103
(PROPERTY
RETAIL
FRINGE
URBAN
RANGE OF IMPACTS ON
POTENTIAL RENTAL INCREASES FOR URBAN FRINGE ....................................... 104
URBAN FRINGE RETAIL PROPERTY (ORIGINAL 40 SPACES).............................. 105
URBAN FRINGE RETAIL PROPERTY (REDUCTION TO 20 SPACES)................... 105
TABLE 5.2.3-1: COLLAR COUNTY OFFICE BUILDING COST STRUCTURE WITHOUT PARKING
- ... -------------------------......... 10 7
FE E .....................................................--------------.....
TABLE 5.2.3-2: COLLAR COUNTY OFFICE BUILDING COST STRUCTURE WITH $3 PARKING
------------------------- -------------------.-----....-- 10 7
FE E ............................................................----.----..--------------COUNTY OFFICE (PROPERTY
COLLAR
ON
TABLE 5.2.3-3: RANGE OF PARKING FEE IMPACTS
108
-- -- --. -- .- -- ---...............................................
-.
.
....
LEV EL) ............................................-(RENTAL
OFFICE
COUNTY
COLLAR
ON
IMPACTS
FEE
PARKING
OF
TABLE 5.2.3-4: RANGE
- - - - -................................ 108
.. .-- -. ------------R A T E S ) ............................................................TABLE 5.2.3-5: RANGE OF PARKING FEE IMPACTS ON COLLAR COUNTY OFFICE (ANNUAL
109
. - ---------- ---..................................
- -- .
..........---.
R EN TS) ......................................................-PARKING
NO
TABLE 5.2.4-1: COLLAR COUNTY RETAIL CENTER COST STRUCTURE WITH
1 10
. . --------..............
... ----....- -.. ---..
FE E ..........................................................
FEE
$3
PARKING
WITH
STRUCTURE
COST
CENTER
TABLE 5.2.4-2: COLLAR COUNTY RETAIL
110
. -------------... - ... . -- -- -- -- -- -- -- -- -- --................................
.........................................................................
CENTER
RETAIL
COUNTY
COLLAR
ON
IMPACTS
FEE
PARKING
OF
RANGE
5.2.4-3:
TABLE
111-- - III
.. ------...- - - - - - - - - --...........................
(PROPERTY LEVEL).................................................--.........TABLE 5.2.4-4: RANGE OF PARKING FEE IMPACTS ON COLLAR COUNTY RETAIL CENTER
(RENTS - FULL PASS ALONG OF COST)..........................................................................--.111
TABLE 5.2.4-5: RANGE OF PARKING FEE IMPACTS ON COLLAR COUNTY RETAIL CENTER
(RENTS - PARTIAL PASS ALONG OF COST).............................................................................112
............ 113
TABLE 5.2.4-6: TYPICAL ANNUAL SALES FOR SUBURBAN RETAILER......
TABLE 5.2.4-7: RANGE OF PARKING FEE IMPACTS ON RETAIL PRICES................ 114
TABLE 6.1.5-1: ADDITIONAL ANNUAL SOCIAL COSTS IMPOSED BY EACH NEW SUBURBAN
EMPLOYEE IN THE CHICAGO AREA, AS COMPARED WITH THE PER-EMPLOYEE COSTS
OF URBAN DEVELOPMENT (PERSKY & WIEWEL, 1996).........................122
TABLE 6.1.5-2: ADDITIONAL ANNUAL COSTS IMPOSED ON SOCIETY BY GREENFIELD
BUSINESS LOCATION, BASED ON NUMBER OF EMPLOYEES. ............................................ 123
TABLE 6.1.5-3: ANNUAL COSTS OF PARKING FEE, BASED ON NUMBER OF SPACES
124
PROVIDED ...............................................----------...---------------..............
TABLE 6.2.1-1: RTA DISTRIBUTION FORMULA (RTA).....................................................................131
TABLE 6.2.1-2: APPROXIMATE DISTRIBUTION OF PARKING TAX FEES USING EXISTING
131
....... -... --------------.......................
FORM ULA ($3 RATE)..............................................................
EXISTING
USING
FEES
TAX
PARKING
OF
TABLE 6.2.1-3: APPROXIMATE DISTRIBUTION
-------------............... 131
FO RM U LA ($6 R A TE)........................................................................................
EXISTING
USING
FEES
TAX
PARKING
OF
DISTRIBUTION
APPROXIMATE
6.2.1-4:
TABLE
...... - .--------.---.--.................... 132
FO RM ULA ($9 RATE)..............................................................---TABLE 6.2.1-5: 2003 ANNUAL RIDERSHIP AND VEHICLE REVENUE HOURS FOR RTA'S THREE
SERVICE BOARDS (APTA)..................................................................133
TABLE 6.2.1-6: SHARES OF PARKING REVENUES IF DISTRIBUTED ACCORDING TO
PERFORMANCE MEASURES, BASED ON $3 MONTHLY PER-SPACE RATE.......................133
TABLE 6.2.1-7: SHARES OF PARKING REVENUE IF DISTRIBUTED ACCORDING TO
PERFORMANCE MEASURES, BASED ON $6 MONTHLY PER-SPACE RATE ....................... 133
TABLE 6.2.1-8: SHARES OF PARKING REVENUES IF DISTRIBUTED ACCORDING TO
PERFORMANCE MEASURES, BASED ON $9 MONTHLY PER-SPACE RATE ....................... 134
TABLE 6.2.1-9: POTENTIAL PARKING FEE AMOUNTS TO BE RESERVED FOR PERFORMANCE
IMPROVEMENTS AND/OR REGIONAL MOBILITY PROJECTS .............................................. 135
1 Introduction
The purpose of this research is to examine the political & technical feasibility of a
regional, non-residential parking fee and to establish it as an alternative transit
operations funding source, specifically for Chicagoland's Regional Transportation
Authority (RTA). In addition to generating much-needed cash flow, the fee
should be viewed as part of a long overdue effort to reframe the regional
approach to transit finance.
1.1
Objectives
-
Determine whether a region-wide parking fee is an appropriate source of
funding for public transit within the Chicagoland context
-
Identify the most common public misconceptions about parking fees and
provide proper clarification
-
Analyze the incidence and actual magnitude, in an effort to gauge the
potential sources and intensity of opposition
-
Anticipate logistical challenges and prepare implementation strategies
accordingly
-
Demonstrate how the parking fee can act as the impetus for a more
performance-based approach to regional transit finance
1.2
Motivation
1.2.1 The Benefits of A Healthy Regional Transit Network
While initially intended to enable greater mobility, the nation's automobile
infrastructure is now characterized by growing travel delays, particularly in
urbanized areas. In the Chicago Metropolitan area (popularly referred to as
Chicagoland), total costs caused by congestion delays were estimated to reach
$4.27 billion in 2003 (Texas Transportation Institute [TTI], 2005). The annual per
capita congestion cost equivalent is $526 (and $976 per peak traveler). Given
ongoing increases in roadway traffic, an additional 114 lane-miles' are needed
annually to simply prevent congestion levels from becoming any worse. The
actual expansion rates for the years 1995 through 2002 have fallen far short of
this target, with an average of only 29 lane-miles constructed per year.
Furthermore, most roadway expansions in recent years have been on the arterial
network while major freeway expansions have lagged behind with an average of
The lane-mile figures include both freeway and arterial street construction.
Introduction
M
5 lane-miles constructed annually between 1995 and 2002. Consequently, there
the ratio of available lane-miles to vehicle miles traveled (VMT) is steadily
decreasing. In other words, roadway construction is not keeping pace with the
steady growth in traffic.
Available Lane Miles per 1,000 VMT
Chicagoland, 1982-2002
0.13
0. 12
01
-
Lane Miles per
000 VMT
0.09 0.08 -
0.07
Year
Figure 1.2.1: Available lane-miles per 1,000 vehicle miles traveled (TTI)
Although $4.27 billion is already quite high, the congestion costs could have
been as much as $1.58 billion more if the region did not have such an extensive
transit network. The entire RTA system carried approximately 582 million
passengers during the year 20032 at a total public cost of approximately $907
million. On average, this is the equivalent of 1.6 million unlinked trips per day.
As an alternative to the extensive roadway construction mentioned above,
existing congestion levels could be maintained by attracting an additional
182,000 transit riders daily, equaling a ridership increase of 11 %. (TTI, 2005)
2 There
are slight differences between the TTI estimate of 582 million unlinked
trips and the estimates provided by the service boards.
3 This amount includes sales tax revenues, local government contributions, and
FTA paratransit funding. (Data submitted to State House Committee on Mass
Transit, 2005)
Regional Parking Fee
Of course, since the cost of congestion is already high, the true goal should not
simply be to maintain existing congestion levels. The Chicago area already has a
travel time index of 1.57, making it the second worst in the nation. While a certain
degree of congestion will always be present (Downs, 2004), more transportation
alternatives are needed to provide at least some mobility relief. Since roadway
expansion rates are so clearly inadequate, one would expect that transit has
become a regional priority. Instead, Chicagoland's transit network continues to
suffer from a chronic lack of political and financial support.
This is puzzling since, according to the figures cited above, justification of public
transportation could be based on the congestion savings alone. Transit is a good
value even without considering the likely environmental benefits.
1.2.2 Transit Operations Finance
All too often, there is a sizable mismatch between available funding levels and
the operational needs of public transit.4 While fare revenues may have been
adequate to cover operational expenses during the first half of the twentieth
century, thus sustaining a large number of private service providers, post-war
transit budgets have required increasing levels of public subsidy. The reasons
for this are not entirely straightforward. On one hand, transit farebox revenue
levels are likely to have been impacted by increased automobile ownership,
changes in urban land-use patterns, and construction of an extensive highway
network. While the following details are specific to the Chicago case, they are
representative of national phenomena:
- Increased automobile ownership: Over the period 1947-1997, the number of
automobiles registered just in the city of Chicago increased by 75%. This was
during a time when the population of the city actually declined by 25%.5 As
automobile ownership rose, the number of people relying upon transit for daily
travel steadily declined.
- Changes in urban land-use patterns: A larger share of businesses &
households are located outside of the urban core and property development
patterns in these suburban areas are less amenable to transit usage. Over fifteen
years ago, Cervero made the following observation about Chicago's suburban
office parks:
"If a worker is motivated enough to patronize mass transit to work, typically he
alights the bus off-site, facing long walking distances to his office, compounded
by vast parking areas, wide boulevards, disconnected sidewalks, imposing
freeway interchanges, and other physical barriers. Such physical settings create
It is important to specify that this is entirely apart form the ongoing capital needs
of a typical transit service provider; in most cases, completely separate annual
budgets are developed for each.
5 Chicago Transport Dataset, provided by Ian Savage of Northwestern University.
4
Introduction
transit-hostile environments, dissuading even the staunchest transit advocates
from busing to work." (Cervero, 1989)
- Construction of extensive roadway network: Over the period 19501975, at least 12 new freeways and tollways were constructed in the Chicago
Metropolitan Area. These enabled more direct access, both to outlying parts
of the region and beyond.
Figure 1.2.2: Major Chicago area expressways and date of construction
(CATS MPO)
At the same time that ridership and farebox revenues were declining, transit
deficits grew due to the gradual elimination of Federal operating subsidies, which
Regional Parking Fee
reached a peak of approximately $80 million in the late 1970s (equivalent to over
$200 million in 2005 dollars). (CTA)
While the specific mix of causes is not entirely certain, there is no doubt that US
transit agencies are currently unable to sustain service levels on fare revenues
alone. Consequently, various sources are used to augment operating budgets,
including annual subsidies from state and local governments. Additionally,
dedicated local option tax funds, either generated directly by the transit agency or
by the municipal government, are increasingly important to the survival of transit
service.6
Transit Operations Funding Sources:
2002 National Totals
Federal
Government
5%
State
Government
Passenger
Fares
33%
25%
Local
Government
Other Directly
Generated
17%
20%
Figure 1.2.3: 2002 National transit operating funding sources (APTA)
Even with this mix of funding sources, many transit agencies throughout the
county are still struggling to maintain existing service levels. A particularly
dramatic case of this can be observed in the Chicago region.
6 In
"Quiet Revolution," Goldman and Wachs define local option transportation
tax as "a tax that varies within a state, with revenues controlled at the local or
regional level, and earmarked for transportation-related purposes." In the specific
area of operations financing, these have included sales taxes, motor vehicle
registration fees, and gasoline taxes.
Introduction
1.2.3 The Chicagoland Case
Transit finance has long been a contentious issue in Chicagoland, but the
funding debate has received a great deal of public attention over the past year.
The transit needs of the region are served by three public service providers: the
Chicago Transit Authority (CTA, providing urban rail & bus), Metra (suburban
commuter rail), and Pace (suburban bus). The service area for this regional
network encompasses six counties along the southwestern shore of Lake
Michigan. The RTA administers all operational subsidies for these three service
boards. The RTA's operational funding sources include regional sales tax, State
sales tax, municipal contributions, and a minimal amount of Federal paratransit
funding.
During the annual allocation of funds, the RTA's primary concern is whether
service boards have cumulatively achieved the mandated fare recovery ratio of
50%. If this one requirement is met and the budget proposals are acceptable,
then most funding is automatically distributed between the service boards based
on a twenty year old formula. This formula generally redirects most sales tax
dollars back to location of origin of sale, i.e. most taxes raised in the suburbs are
distributed to Pace & Metra while most taxes raised in the core are given to the
CTA. A smaller portion of available funds is distributed at the discretion of the
RTA board, primarily with an eye towards supporting capital projects or closing
any funding gaps.
Recently, the loss of Federal operating subsidies plus the rising costs of federally
mandated paratransit services has created a series of funding crises at CTA and
Pace. At the same time, Metra has been increasing capital expenditures and is
interested in more funding for operations. This has created new tensions over
distribution of the limited RTA funding. Further fueling intraregional animosity is
the fact that, under the 1983 RTA statute, recent regional population shifts would
decrease Chicago representation on the RTA board.
At the core of the debate are CTA claims that the existing RTA funding procedure
and governance is inherently flawed, essentially favoring suburban service at the
expense of urban service. The CTA has repeatedly called for a formal reevaluation of the out-dated distribution process, which was originally to have
been scheduled for 1988. Understandably, suburban interests are passionately
opposed to all policy alternatives that would direct fewer regional dollars to their
budgets. At the time of this writing, the region had reached a point of political
deadlock.
This most recent conflict has served to illustrate the true nature of transit
provision in Chicago. Typically, more energy is spent on interagency &
intraregional politics and significantly less on ensuring the health &
interconnectivity of the larger network. Ideally, there should be more of a focus
on providing fast, safe, reliable transit service for the entire region. However,
beside the consideration of fare recovery, the RTA board is not required to pay
Regional Parking Fee
attention to the actual performance of the transit services. Since the
establishment of the RTA funding structure, there has been a large increase in
regional population (overall increase of 14% between 1983 and 2002) even
larger increases in the regional number of households (overall increase of 17%
between 1980 and 2000), and a national trend of more women entering the
workforce.
Chicago Metropolitan Area Population
1983-2002
8.2
8
7.8
7.6
7.47.2
7
6.8
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
year
Figure 1.2.4: Regional population growth, 1983-2002 (TTI) 7
While the period 1980-2000 had an approximate population increase of 14%,
the number of households in the 6 county region actually increased by 17%. It is
likely that the number of households is a better measure of transit usage. (US
Census)
7
Introduction
M
Regional Growth in Number of Households
3.0
-
2.9
2.8
2.7
2.6
2.5
2.4
1990
1980
2000
year
Figure 1.2.5: Regional Growth in Number of Households, 1980-2000
Share of Female Population in Workforce:
United States, 1980-2000
59
57
55
53
51
49
47
4444-4-444
45
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
Year
Figure 1.2.6: National trend of female workforce participation (US
Department of Labor)
Regional Parking Fee
Consequently, it is reasonable to conclude that the demand for workplace access
has increased significantly over the past two decades. Furthermore, it is equally
reasonable to believe that transit could have captured at least a portion of this
growing customer market. Although the number of suburb-to-suburb commutes
has grown in recent years, a full 60% of the region's workforce still commute to
central country locations (either from suburbs to Cook County or from one part of
Cook County to another), showing a potentially untapped market for transit
riders. (McGuckin & Srinivasan, 2003).
Chicagoland Worker Flows
2000
Others
5%
Collar-Collar
28%
Cook-Cook
50%
CollarCook
Cook-Collar
7%
Figure 1.2.7: Chicagoland Worker Flows Between Cook and Collar
Counties, 2000 (McGuckin & Srinivasan, 2003)
While the RTA is the nation's second largest system in terms of ridership,8 only
17.7% of workers employed in the central county (Cook) actually rely upon transit
for their daily commutes. (US Census, 2000)
8 APTA,
75 Largest Transit Agencies, Fiscal Year 2002, Ranked by Passenger
Miles (Thousands)
Introduction
20
Commute Mode
2000 By Destination
2,500,000
1,250,000
625,000
-
Alone
JDrove
W
2 Person Carpool
W 3 Person Carpool
C:
4 Person Carpool
W Bus
Wo Streetcar, Subway, Elevated
W RR or Ferry
T
0
Bi keiWalk
6
12
18
Miles
Figure 1.2.8: Cook County Modal Split (US Census, 2000)
National statistics indicate that other transit agencies throughout the country
have experienced ridership growth during the same period. However,
Chicagoland transit service has stagnated over the past two decades and
regional ridership in 2003 was actually over 30% lower than it was in 1980.
Regional Parking Fee
850
800
750
700
650
600
550
500
year
Figure 1.2.9: Chicagoland Regional Ridership Declines, 1980-2004 (CTA)
A private firm experiencing such disappointing performance would certainly
reconsider its core strategies. The RTA, on the other hand, has continued with
business as usual for the past two decades. This is despite the fact that a
number of important factors have changed during this period. Since 1983, the
transit funding context has changed in the following ways:
1) Decline, and eventual elimination, of Federal operations subsidies: The
RTA had been receiving substantial operations subsidies from the Federal
government since the 1970s. After reaching a peak of over $80 million in 1979
(over $200 million in 2005 dollars), Federal operations funding gradually declined
until disappearing completely in the late 1990s. When the 1983 RTA reforms
were drafted, the federal subsidy was still a major component of total regional
transit funds. As the declines became more evident, it would have been logical
for the RTA to formally consider how regional transit finance would be impacted
and to adjust its procedures accordingly.
2) Federal unfunded mandate for paratransit provision: The passage of the
Americans with Disabilities Act in 1990 marked a turning point in transit provision.
On the capital side, all new vehicles and stations would have to meet
accessibility guidelines, including the provision of elevators and lifts. This led to
increases in both capital and operating costs. Additionally, transit agencies were
required to provide complementary paratransit service for individuals that were
unable to make use of fixed route service. In 2005 alone, regional paratransit
provision is expected to create operating expenses of $52.2 million for CTA and
$10 million for Pace (Metra currently does not provide paratransit service).
Again, the RTA should have recognized the growth of paratransit responsibilities
with a reconsideration of the existing funding process.
Introduction
CTA Paratransit Expenses and Federal Operating Assistance
(adjusted for inflation)
$90
$80
$70
$60
$53
$50
43
$40 -$38
$34$28
$30
$20
$17
$20
$18
$21
$21 $23
$29
$30
$30
$31
$30 $29
$24
$10
$7
$11
$0
-----11985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
-] CTA Paratransit Expenses -
Federal Operating Assistance
Figure 1.2.10: Comparison of paratransit expenses and federal operating
assistance, 1985-2005 (CTA)
3) Intermodal Surface Transportation Efficiency Act (ISTEA): In 1991, the
Federal government passed legislation that provided regions with greater
flexibility in the allocation of transportation capital dollars. The enhanced national
approach to regional mobility was a perfect opportunity for the RTA to reevaluate
its own role in the provision of capital and to shift its focus to operational
concerns.
4) Introduction of Illinois FIRST: in 1999, the state established the Illinois Fund
for Infrastructure, Roads, Schools, and Transit (FIRST). This was a five-year,
$6.3 billion package of which $2.1 billion was devoted to public transit. This was
largely used to leverage Federal funding for capital projects, thus reducing
regional reliance on RTA funds for capital. Again, this provided an opportunity for
the RTA to shift its focus away from capital and toward the challenges of
operations finance.
5) Evidence of Regional Mobility Declines: Every year since the early 1980s,
the Texas Transportation Institute (TTI) has produced its Urban Mobility Report,
which compares the congestion levels of major US metropolitan areas. While this
has shown consistent worsening of national congestion levels, it is particularly
striking that the Chicago region has moved from seventh worst to second worst
over the past 20 years.9 Out of the worst seven metropolitan areas of 1983,
9 These rankings are based on the travel time index measure, which is the ratio
of peak-period travel time to the time that it would take to complete the same trip
Regional Parking Fee
Chicagoland was the only one to not have experienced ridership gains during the
period 1983-2003.
6) 2005 CTA Budget Crisis: The CTA's most recent funding crisis involves a
shortfall of $82.5 million. According to the latest RTA Budget Review, this amount
is required just to maintain current levels of service. If sufficient funding is not
identified, the service board faces a combination of service cuts and fare
increases.
Each event created a window of opportunity for the RTA to reconsider its
approach to transit finance. Yet, no alterations were ever made and the region
remains reliant upon a structure that does not adequately address mobility
needs. The current funding crisis is a direct result of these failings.
Few transit finance stakeholders seem to believe that a win-win situation is
possible. The limited supply of funding and political control is viewed as a sign
that there will be some regional losers. As expected, the most vulnerable
stakeholder groups are fighting to ensure that they do not fall within this category.
However, if this adversarial mentality persists, a situation in which everyone
loses is the most probable outcome. In order to foster a high level of mobility
throughout Chicagoland, a more coordinated approach is necessary. This must
include both the pursuit of new funding sources and a reconsideration of RTA
priorities.
1.2.4 Prior Research
The financial challenges faced by Chicago area transit have been the focus of
two recent theses by degree candidates in MIT's Master of Science in
Transportation program.
"Evaluating the Costs and Benefits of Increased Funding for Public
Transportation in Chicago" by Mark Schofield examined a variety of different
operational funding scenarios for the CTA, with an eye toward the potential longterm, regional impacts of insufficient funding levels. He found that, given the
looming possibility of fare increases and service cuts, there is sufficient
justification for increased funding. The various direct and external costs 0
associated with ridership loss are estimated to exceed the actual costs of
maintaining baseline service levels and fares. While the author does not focus
specifically on the potential funding mechanisms, it is suggested that vehicle
at free-flow speeds. Chicagoland's current travel time index value is 1.57,
meaning that a trip that would take 20 minutes at free flow speeds would take
over 31 minutes during peak travel periods.
10 In his analysis. Schofield focused on both the direct loss in consumer benefit
as well as the region-wide congestion and air pollution costs generated by trips
shifted to auto.
Introduction
registration fees, parking fees, and congestion charging could have greater
public cost advantages than the existing sales tax.
"Paying for Transit Operations: Challenges and Solutions for the Chicago Transit
Authority," by Julie Kirschbaum examined specific funding alternatives in light of
their revenue potential, incidence, side effects, and political feasibility. It was
recommended that alterations be made to the existing RTA funding distribution
formula and that the sales tax rates in the region's wealthiest counties be
increased." In addition to these main policy measures, Kirschbaum also
explored the revenue potential of (1) including a transit pass with all vehicle
registrations and (2) imposing an off-street commercial parking fee throughout
the region. While the transit pass was found to be a realistic option, data on the
parking fee was not as readily available. In the end, it was acknowledged that
more analysis would be needed before a solid conclusion could be reached.
It is my intention to build upon the work of my predecessors with a more focused
examination of a specific funding option: a per-space fee levied on all nonresidential parking facilities throughout the region. It is hypothesized that this type
of local option funding may be the most appropriate solution given both the
regional context and immediate transit finance needs.
1.3
Methodology
1.3.1 Identifying Solutions: A True Regional Mentality
This section presents the Chicago transit funding case within a regional context.
Using recent census data and drawing upon regional development literature, it is
demonstrated that the urban/suburban divide oversimplifies the reality. This
supports the idea that the funding crisis can be most appropriately handled on a
regional scale, preferably in a manner that does not exacerbate pre-existing
intraregional tensions. Such policy conditions eliminate some of the most well
known - and fiercely debated - funding options. Through this regional-level
analysis, the parking fee emerges as an option that may be politically feasible
and could achieve desired funding levels.
1.3.2 Common Misperceptions of a Parking Fee
This section provides a more in-depth examination of political feasibility. Four of
the most likely parking fee misconceptions are identified and logical counterarguments are developed. If broad political support is to be attained, these
arguments should be part of a regional public awareness campaign. The four
misconceptions are:
1 Currently, the distribution formula is designed to direct most sales tax revenues
generated in the outer suburbs towards Metra & Pace. At the same time,
consumers the suburbs pay a lower sales tax rate (0.25%) than the rate faced by
consumers in the City of Chicago.
Regional Parking Fee
parking fee will primarily affect the outer counties
The parking fee will force business activity relocation
* The most effective and appropriate use for a parking fee is roadway
expansion
" The parking fee will serve as a travel demand management tool
" The
e
1.3.3 Incidence & Magnitude: Property Level Impact
One of the advantages of the parking fee is the fact that the statutory incidence is
not directly on the general public. Rather, the fee would be levied directly on
commercial property parking facilities. Since commercial property owners will be
the ones actually receiving the annual bill, the real estate sector is expected be
the most vocal opponent of the policy. It is probable that this particular group will
argue that the fee will (1) cause serious harm to property-level income and (2)
the property owner will be forced to pass a major financial burden along to
tenants, customers, and employees.
First, the theoretical foundation for these claims is reviewed. From an economic
perspective, it is possible that the owner will pass the fee along, but he must also
deal with the market response. Due to short-run shifts in demand and long-run
changes in property supply, the ultimate market equilibrium is expected to be one
in which at least a portion of the parking fee is absorbed.
Next, the actual magnitude of increased real estate expenses is determined and
examined within the context of several property cases, including:
-
Urban Core Commercial Facility
Urban Fringe Retail Property
Suburban Office Property
Suburban Retail Property
The property-level costs and revenues for each of these cases are based upon
market-wide data from CB Richard Ellis and details available through Chicagoarea market listings.
First, assuming that the parking fee costs will be completely absorbed by the
property owner, the impact on net operating income (NOI) is determined. Then,
assuming that the costs may be at least partially passed along to leaseholders,
the impact on rental rates is then calculated. Finally, assuming that a portion may
be passed along to customers, there is a consideration of the actual impact on
the costs of retail goods. Increases in retail prices are then compared with the
impacts of potential sales tax increases.
This analysis, based on the perspective of existing property owners, is then used
to make predictions about the possible behavior of those seeking to develop
property in the future. In addition to the actual parking fee cost, the market
impacts of associated transportation improvements are considered. In this part of
Introduction
26
the analysis, it is assumed that the parking fee could eventually result in greatly
enhanced public transportation alternatives and considerable improvements in
congestion levels. This is expected to have implications for both property values
and location decisions.
1.3.4 Implementation Challenges
Efforts to (1) counter general misperceptions and (2) clarify the fee's actual
incidence & magnitude will help boost its profile as an implementable option.
However, the implementation stage will involve its own specific set of challenges.
These include:
Legal
It is possible that the fee will be challenged on the legal grounds that it violates
Fifth Amendment restrictions on takings. Specifically, the transit authority may be
required to prove that there is both logical nexus and proportionality between the
fee and the actual act of providing parking spaces. The legal details will first be
defined through a review of relevant court findings. Then, an argument for both
logical nexus and proportionality will be developed based on a comparison
between the total unaccounted societal costs of commercial development and
the actual parking fee rate levels. It is notable that, in the case of a tax, the transit
authority does not have to demonstrate such a connection. Yet, this added
complication of a fee is more than justified by the fact that it (a) infuses the
funding strategy with greater public legitimacy and (b) enables a much broader
application of the fee, resulting in a larger revenue stream at lower rates.
Political
The way in which parking fee revenues are distributed will likely cause numerous
debates. Although it would be easiest to channel all revenues (including both the
parking fee and the existing sales tax) into the same general fund and continue
use the existing RTA distribution formula, this approach is
shown to be flawed in two distinct ways:
- While the method of revenue collection would be rationally connected with
the negative mobility externalities of auto-oriented development, the existing
RTA distribution formula has no logical association with actual mobility goals.
- An extremely high parking fee rate would be required just to ensure that the
CTA's share is large enough to avoid cutbacks and would not be nearly
enough to support service improvements. At the same time, Metra would get
more than it can realistically use.
Since reliance on the existing formula would be ineffective, two alternate options
are considered:
Regional Parking Fee
Channel all revenues (parking fee and existing sales tax) into the same general
fund, but completely overhaul the RTA distribution formula.
OR
Channel the parking fee revenues and the sales tax revenues into separate
funds. While the sales tax revenues continue to be distributed based on the
existing RTA formula, the parking fee revenues would be distributed based on a
new performance-based formula. This could include distribution based on:
- Absolute annual values of performance measures such as ridership,
vehicle miles traveled, or vehicle hours for each of the three service
boards.
- Relative increases in key performance measures for each of the three
service boards.
Additionally, a portion of parking fee revenues could be reserved for a special
regional mobility fund that provides funding to counties and municipalities for
specific mobility-enhancement projects.
The financial and political implications of these two options are explored.
Institutional
Assuming that the RTA administers the parking fee using a more performancebased distribution formula, certain institutional changes will be necessary.
Whereas the RTA has previously had little interest in each service board's actual
performance levels, the new distribution approach would require greater
accountability. Amendments to the RTA's governing statute will be necessary to
reflect this added responsibility for regional mobility. The potential long-run
implications of this will be explored.
Additionally, it will be important to find the most efficient and inexpensive way to
implement the fee. Through an examination of the existing Perth case study, a
basic implementation approach is determined.
1.4
Overview of Report Structure
Chapter 1: Introduction
Chapter 2: Regional Transit Finance: Identifying the Problems
Chapter 3: Identifying Solutions: A True Regional Mentality
Chapter 4: Common Misconceptions
Chapter 5: Incidence & Magnitude: Property-Level Impact
Chapter 6: Implementation Challenges
Chapter 7: Conclusion
Introduction
28
1.5
Chapter Summary
Chicagoland is currently facing a combination of high roadway congestion and a
pending transit finance crisis, which will ultimately lead to even greater
congestion levels. Rather than just a one-time event, the crisis is just the latest
evidence of a deeply flawed regional approach to operations finance. The region
needs both an additional operations funding source and a fresh approach to
transit finance. It is possible that a regional, non-residential parking fee can serve
both of these needs.
Regional Parking Fee
2 Regional Transit Finance: Identifying the Problems
"I believe in the next 18 months, we also have to engage the entire region in
some consensus building to really think through the kind of revenues we need to
support transit in the future, and also to make sure that the wonderful expansions
that are to be planned everywhere really have an opportunity to be
implemented." - Illinois State Representative Julie Hamos (Seidenberg, 2005)
An angry Metra chairman Jeffrey Ladd said his agency will refuse to work with
the Chicago Transit Authority to seek more transit dollars from Springfield.
Instead, Metra will focus on making 'sure that what we have isn't taken away.'
(Groark, 2004)
2.1
Background on the Budget Crisis
2.1.1 An Historical Overview of the CTA's Operating Budget
Created in 1947 through a consolidation of Chicago Surface Lines and Chicago
Rapid Transit (and, in 1952, the addition of Chicago Motor Coach), the CTA was
intended as a public reform of the declining private transit companies. In its early
years, the CTA was expected to cover all expenses through transit revenues.
However, this became increasingly difficult in the post-War years as transit
demand declined and the basic costs of system operations grew, due at least in
part to rapid increases in national wage rates.12 During this time, the CTA was
also covering debt service on the bonds used to finance the original private
transit consolidations. A more serious budgetary situation was likely averted due
to greater efficiencies through both technological improvements (enabling the
agency to reduce per vehicle staffing requirements) and elimination of less
productive routes. However, despite these efforts, the CTA found in 1957 that a
$0.05 fare increase (from $0.20 to $0.25) would be required to avoid a budget
deficit. Mayor Richard J. Daley endorsed a proposal to avoid this increase
through the use of state gasoline taxes, but state politics did not work in the
CTA's favor.
The CTA continued to face deficits through the late 1960s and responded with a
combination of fare increases and service reductions. By 1970, another fare
increase (from $0.40 to $0.45) was under consideration and, once again, the
possibility of supplementing the operating budget with gasoline tax revenues was
discussed. As before, Mayor Daley was a supporter of this scheme, but this time
the governor also issued a strong endorsement (the 1957 proposal had only
lukewarm gubernatorial support). However, as was the case 13 years prior, the
plan was rejected by the legislature. Without a more stable dedicated funding
During the period 1948-1957, real wage rates rose 30% nationally. (Savage, p.
189)
12
Regional Transit Finance:
Identifying the Problems
30
source, the CTA continued to rely on state subsidies to deal with frequent funding
gaps. (Allen, p.115) Since such subsidies were not guaranteed and relatively
small, the long-term sustainability of services was constantly in question and, by
necessity, the occasional fare increase was still a major component of the CTA's
finance strategy.
By the early 1970s, a task force had been appointed to study the transit problems
and ultimately issued a report entitled "Crisis and Solution: Public Transportation
in Northeastern Illinois." This led to the establishment of the Regional
Transportation Authority (RTA), which was designed to solve the chronic
problems of both the CTA and the private regional commuter services throughout
the six Chicagoland counties. Any future State or Federal assistance to the CTA
would be directed through this new layer of government. With the creation of the
RTA, the following funding sources became available to the region's transit
providers:
.
*
3 / 3 2 nd
of the net revenue from state sales tax collected in the region
$14 of each motor vehicle registration fee in the City of Chicago
* municipal contributions of at least $5 million annually (primarily from City of
Chicago and Cook County)
(Tecson, 1974)
The new structure also created options for two additional funding sources, to be
implemented at the discretion of the RTA: an off-street commercial parking tax
and a 5% gasoline tax. Ultimately, only the gasoline tax option was exercised,
amidst much controversy in 1977. Shortly after RTA was created, the Federal
government also began to offer Section 5 funds, which were intended to provide
operational assistance to transit providers throughout the country. On the
surface, this combination of funding had the potential for giving the CTA the
financial stability it had lacked in previous decades. However, RTA was plagued
by institutional problems and there seemed to be little regard for cost-effective
management. As major subsidies flowed into the organization, large amounts
were spent to support failing suburban services (Allen, 1996) and enhance labor
compensation (Savage, 2004).
In 1979, the gasoline tax was eliminated and the sales tax structure was altered
to resemble its current form: the RTA levied a 1% sales tax on the City of
Chicago & Cook County and a 0.25% sales tax on the collar counties. At that
time, the 3 /3 2 nd state sales tax subsidy was eliminated. Officially, the switch from
a uniform regional sales tax contribution (3 /3 2 nd for all 6 counties) to a tiered
structure (in which collar counties contribute significantly lower proportions) was
intended to account for differentials between urban and suburban usage of the
transit system. However, rather than being a simple practical matter, this decision
was politically charged and set the stage for future urban-suburban conflicts.
Regional Parking Fee
Since initial sales projections were incorrect, the new structure actually resulted
in lower revenue than under the earlier funding structure, forcing several
increases in CTA's base fare and major service cuts during the early 1980s. 13
In 1983, a regional movement for more drastic transit reforms resulted in a
legislative decision to decentralize operations amongst three major service
boards:
CTA: Structure of the CTA remained unchanged. Continued to provide urban rail
and bus service.
Metra: New provider of suburban commuter rail services.
Pace: New provider of suburban commuter bus services.
CTA
100%
30%
55%
70%
PACE
0%
15%
30%
METRA
0%
0%
Figure 2.1.1: 85% sales tax distribution formula (RTA)
With the creation of two new transit boards, it was necessary to determine a
framework for the division of annual RTA subsidies. CTA's portion of regional
sales tax revenues was based on a fixed formula that effectively made the CTA
budget highly dependent on the economic health of the region's core (City of
Chicago and Cook County). In theory, this would yield reasonable revenues as
long as sales in the city and inner suburbs remained consistently strong. While
85% of the sales tax revenue was divided based on the formula outlined in
Figure 2.1.1, the remaining 15%, after covering RTA administrative expenses,
was intended to be distributed at the discretion of the RTA board. Furthermore,
the State would match 25% of regional sales tax revenues with subsidies from
the State's General Revenue Fund (this transfer from the State to the RTA is
referred to as the Public Transportation Fund). This funding was also to be
distributed at the discretion of the RTA. Originally, this restructuring was to be
reviewed after six years, but such an analysis never occurred.
Regional Transit Finance:
Identifying the Problems
32
CTA Historic Operating Funding
1985-2003
1000
900
800
.
~Other
700 -
N FTA 5307 Paratransit
600
400
FTA Operating
5 Local Government
5 Reduced Fare
RTA Discretionary
300
M85% Sales Tax
200
U Passenger Revenues
100
0
year
Figure 2.1.2: CTA Historical operating funding (House Committee on Mass
Transit, 2004)
In the beginning, the new formula seemed to work, but it was actually
constructed upon an unstable and unpredictable foundation. An often-overlooked
aspect of the finance debate was that, during the early years of the modified RTA
structure, the Urban Mass Transit Administration (UMTA) 14 provided a portion of
the CTA's operating budget. In 1985, this amounted to approximately 8.6% of
total CTA revenue (which was equivalent to 58% of the RTA discretionary funds
to CTA for that year or 33% of the total sales tax revenues distributed to CTA).
However, the Federal operating component steadily declined over the next
decade until, in 1999, it were completely eliminated. So, for at least a brief time,
the combination of federal subsidies and RTA discretionary funds served to fill
the CTA's financial gap left by the poorly constructed distribution formula.
However, declines in Federal subsidies and poor returns from City and Collar
County sales tax gradually revealed the true weaknesses in the formula. At the
same time, ridership was declining and paratransit & other federal requirements
to improve accessibility were becoming major expenses.
In 1991, the Urban Mass Transit Administration was renamed the Federal
Transit Administration (FTA).
14
Regional Parking Fee
When adjusted for inflation, the Federal subsidies received in 1979 (the peak of
subsidy levels) would be equivalent to over $200 million in 2005 dollars (CTA). If
the Federal program had actually continued at these levels, CTA's budget could
cover current operating needs and provide improved service.
The discretionary funding was officially intended to fill budgetary gaps for any of
the three service boards, not just the CTA. However, in practice, a large portion
has always gone directly to the CTA since the formula funds never sufficiently
covered its financial needs. (Figure 2.1.3) At the same time, Metra has received
operating subsidies beyond its needs, which it has converted to capital
improvements.
Distribution of RTA
Discretionary Funding
$250.0
$200.0
Pace
$150.0
NCTA
Metra
$100.0
$50.0
$0.0
year
Figure 2.1.3: Distribution of 15% Discretionary Funding (CTA)
On the surface, this seems like a reasonable system. Although the dedicated
funding has proven to be chronically inadequate, the discretionary funds ensure
that CTA ultimately receives a sufficient amount of funding. However, the fact
that so much of the discretionary funding is needed just for one of the service
boards is a clear indication that there are fundamental flaws in the base
distribution formula. Overall, the CTA depends heavily upon a very unreliable
combination of funding sources. While its share of formula funds is guaranteed
(100% collected in the City and 30% collected in Suburban Cook), the actual
amount of tax revenue collected is not. While it appears that the share has been
experiencing steady growth, the purchasing power of these funds had historically
shown significant declines (Figure 2.1.4). A recent upturn in CTA's sales tax
Regional Transit Finance:
Identifying the Problems
34
component should have been a welcome development, but instead it meant
declines in the discretionary funding. Between 2004-2006, it is projected that
CTA discretionary funding will be reduced from $194 million to $156 million,
offsetting expected increases in sales tax revenue. Since Metra does not rely on
discretionary operating funding, its total funding will continue to increase during
this time.
85% Sales Tax Component
(1985 Dollars)
170
160
150
140
130
120
110
100
-- CTA
-Metra
N~N
Year
Figure 2.1.4: Comparison of 85% sales tax component of operating funds in
1985 dollars (House Committed on Mass Transit, 2004)
When taken as a whole, the CTA's budget growth has not kept pace with either
inflation or the rate of growth experienced by Metra. According to the CTA, the
actual funding need is closer to $250 million annually. 15 This estimate is based
on the idea that CTA's budget would be this much larger if had historically grown
at the same rate as Metra's. Additionally, if the CTA's fares had grown at the
same rate as Metra's, they would currently be $1.10 instead of $1.75. (CTA,
2004) This combination of more modest fares and increases service funding
could have prevented at least a portion of the ridership loss that occurred since
1983.
5 Even if CTA's budget had simply kept pace with inflation, there would be at
least $100 million more in the current budget.
Regional Parking Fee
35
$900
c
$800
B
$700
D
$647
$600
119r
$500
S$400
2
$300
$502
A
$389
$389
$38
$241
$241
$200
$187
$145
$100
$0
-0\
NO
X40.
Key:
A - Actual
B- If funding had grown at the rate of inflation since 1985
C- If funding had grown at the same rate as Metra's funding since 1985
D- if funding had grown at the same rate as CTA's total funding since 1985
Figure 2.1.5: 2005 Public Funding Scenarios for CTA & Metra (CTA) 16
For most of its history, the financial security of CTA's operations has never truly
been guaranteed. Most efforts to establish reliable funding flows have been
generally unsuccessful. Thus, it is not surprising that, at least in recent years, the
CTA so frequently seems to be in "crisis mode." Last year's fare increase was
just the latest attempt to counter the effects of budgetary erosion. Even more
threatening, the current RTA statute requires that the membership of the RTA
board be adjusted to reflect population, regardless of local tax contribution levels,
ridership, or fare contribution. If Chicago loses a member from the RTA board, it
will lose its ability to block a supermajority vote. In such a case, the discretionary
funds that have been so essential to the CTA could be shifted elsewhere. This is
a solid threat since the RTA has publicly proposed that CTA's share of regional
Includes federal, state and local operating assistance. CTA figures are for bus and
rail services. CTA does not receive any dedicated funding for special services such as
paratransit. Metra experienced an inflation-adjusted increase of 32% between 1985 and
2004; CTA bus and rail experienced an inflation-adjusted loss of 21 %.
36
Regional Transit Finance:
Identifying the Problems
16
funds (69% in 1983, 58% today) should be reduced to 43%. From the CTA's
perspective, systemic change is long overdue.
2.1.2 The Suburban Perspective
While the previous section focused specifically on the history of the CTA's
operating finances, this section broadens the view with an examination of what
has typically been considered the suburban perspective on transit finance.
For most of the 2 0 th century, the suburban counties adjacent to Chicago bore no
more responsibility for urban transit than did the rest of Illinois. Even after the
CTA was established, suburban residents faced the straightforward choice
between using the system and not using the system. Those that opted to conduct
most of their travel by automobile, a segment of the population that grew rapidly
during the post-War years, had ready access to subsidized roadways and could
simply ignore the increasingly worsening condition of the transit network
However, with the creation of the RTA in 1973, the CTA's budget problems were
suddenly transformed into a regional concern. This was, in part, intended to lift
some of the burden off distant Illinois counties that did not directly benefit from
the existence of transit.
"One of the fundamental principals which the RTA established was that transit in
Chicagoland was a problem to be resolved within the metropolitan area. This
meant that, except for small subsidies from the state, almost all of the costs of
building, operating, upgrading, and running transit would come from taxpayers
within the six counties of northeastern Illinois." (Allen, 1996, p. 161)
However, many residents of these six counties were not convinced that the
transit system benefited them any more than it did the downstate counties. The
1974 RTA referendum results showed that only 34.2% of suburban voters were
in favor of establishing the organization. 7 Opposition to the use of funds
generated in the suburbs (such as sales tax or gasoline revenues) for urban
transit was high, especially in the areas farther away from the urban core.
Consequently, a large number of people within the RTA service area were
predisposed to intense dislike of the organization.
It was not until 1977 that the RTA actually acted on its power to impose a 5% gas
tax, in the hopes that this additional dedicated revenue stream would alleviate
lingering financial problems. As expected, most of the suburban RTA board
members were opposed and authorization was only possible because the
representative from the suburb of Evanston sided with urban interests (Allen).
However, opposition remained strong and the gasoline tax was replaced in 1979
with a new sales tax structure that was much more favorable to the suburban
This was balanced by an urban vote of 71.1% in favor of the RTA (28.9%
opposed), resulting in an overall regional approval of only 50.6%.
17
Regional Parking Fee
counties. However, the adoption of the new funding structure actually resulted in
a lower revenue stream, thus impacted all RTA service. Ironically, the suburbs
may have suffered more from the gasoline tax elimination because both
suburban rail & bus were forced to implement even greater service cuts than
CTA.
By the early 1980s, it was clear that the RTA was not meeting the transportation
needs of the region. A reform process was initiated at the state level and, in
1983, Metra and Pace were established as additional entities within the RTA.
The RTA was charged with basic administrative and policy duties while CTA,
Metra, and Pace handled all service provision within their respective jurisdictions.
Additionally, the combined fare recovery ratio of the RTA system was required be
at least 50%. As discussed earlier, the current funding distribution formula was
also established at this time.
It is notable that the RTA reforms occurred within a political environment
characterized by strong racial and regional tensions. The 1983 election of
Democrat Harold Washington, the City's first black mayor, caused a rift in
Chicago's powerful Democratic party. City Council resistance to Washington's
administration forced significant delays in the RTA board appointment process.
At the same time, an amendment to the state constitution led to alterations in the
composition of the legislature. A reduced number of representatives from each
district made it more likely that only Republicans would hail from suburban areas
and only Democrats would hail from urban areas, thus reducing the future
likelihood of bipartisan, suburban/urban, pro-transit coalitions.
When crafting the new RTA structure, very little attention was actually paid to the
promotion of regional mobility. In general, most funding was redirected back to
place of origin, with no consideration of actual service needs.
2.1.3 Continued Tensions
It has been suggested that the reforms of 1983 helped to alleviate the
tremendous suburban-urban animosity that originally existed in the RTA. Some
claim that there was a greater sense of purpose and the overall environment was
much better suited to regional cooperation. According to one board member from
the early 1980s:
" 'It used to be the RTA versus the CTA, so that the city-suburban issues were
really the issues that were resolved on the board. After 1983, that was no longer
true. It's the RTA and Metra and Pace and the CTA... You start forming a regional
mentality in the agency.' " (Allen, 1996, p. 303, quote from Pastora Cafferty
interview)
However, those familiar with recent public discourse between the three service
boards would find the claim of a "regional mentality" somewhat doubtful. The
new RTA structure certainly did not encourage the disparate interests to care
Regional Transit Finance:
Identifying the Problems
38
about the successes of others elsewhere in the region. If anything, it actually
fostered an environment in which a "silo" mentality could easily flourish.
RTA Financial Structure: As discussed earlier, the revenues generated under
the 1983 funding formula never adequately covered the true cost of CTA
operations. Consequently, both federal subsidies and RTA discretionary funds
were required each year to keep urban transit afloat. At the same time, the
suburbs enjoyed stable formula-based revenues that were largely linked to
county of sales origin. As sales tax revenues in the suburbs grew, suburban
constituents could rest assured that 70% of the formula funds originating in the
collar counties would always go to Metra and the remaining 30% would always
go directly to Pace.
The RTA Board can decide at any time that the discretionary funding should be
divided more evenly between the service boards. Until recently, the composition
of the RTA Board has ensured that this would be unlikely. However, as will be
discussed in the next section, the stability of the RTA Board composition is also
in question.
RTA Administrative Structure: While the 1983 Reforms did not alter the
population-based method for determining RTA board composition, it did change
the level of suburban influence over regional transit provision. Prior to 1983,
there was the sense that the CTA dominated regional transit issues. Through the
restructuring, suburban county governments were placed in control of the Metra
board while suburban mayors were granted control over the Pace board.
Balanced RTA board representation is most crucial when it comes to the annual
budget approval process. Since they enable budget veto power, Chicago places
a high value on the five RTA seats in its possession. However, this political
security is not guaranteed since, every ten years, census data is used to reevaluate the RTA board composition. The 2000 census tallies caused
tremendous political tension by calling into question the CTA's 5-member
presence on the board. If one of these urban seats is transferred to suburban
control, there is nothing to prevent a more balanced allocation of RTA
discretionary funds. As indicated earlier, the CTA has come to rely upon these
funds for basic operational survival and would have even greater budgetary
problems if its share were reduced.
During recent transit funding debates, stakeholder has often made a clear
distinction between "urban" funds and "suburban" funds. For instance, a recent
Chicago Tribune Commentary letter advocating the proposed STAR line states:
"The CTA's budget crisis (real or perceived) threatens to chip away at the funding
needed to implement this creative project, and the funding for the STAR line
needs to be preserved before any concessions are made to the CTA...The
system does have problems, but our concern is that shortfalls at the CTA don't
Regional Parking Fee
affect the other providers." McHenry County Board Chairman Michael Tryon
(Chicago Tribune, Oct 6, 2004)
In statements like this, the fact that the three service entities are all components
of the same regional transit network is not even acknowledged. Rather than
working to sustain high levels of mobility throughout the metropolitan area, there
appears to be a much greater tendency to attack the perceived weakest links.
Suburban interests have expressed the belief that the current funding structure is
adequate and the CTA has simply not been doing enough to put its own finances
in order.
The Current Budget
2.2
In July 2004, the Chicago Transit Authority estimated that the operating deficit for
the upcoming fiscal year would be at least $75 million. Budgetary problems
during the previous fiscal year had been mitigated by a base fare increase from
$1.50 to $1.75, and it was suggested that further increases might be necessary.
The Annual Budget Summary released in early Fall 2004 confirmed that mere
maintenance of service levels would require a significant level of additional
funding.
($ in 000's)
Gridlock
Budget
(FY
2005)
Regional
Mobility
Budget
(FY2005)
Difference
Inc/(Dec)
997,151
1,024,377
(27,226)
500,245
500,245
-
496,906
524,132
(27,226)
Public Funding
Available
441,632
524,132
(82,500)
Net Deficit
(55,274)
-
(55,274)
Operating Expenses
Operating Revenues
Public Funding
Required
Table 2.1.3-1: The two 2005 CTA budgetary scenarios (CTA Proposed 2005
Annual Budget Summary)
The budget introduced two potential scenarios:
Regional Mobility Budget: An additional $82 million in funding becomes
available, thus enabling the CTA to properly meet the transit needs of its service
area.
Gridlock Budget: There is no additional funding and, even with expense
reductions of over $27 million, the CTA still faces a budget deficit of $55 million.
Regional Transit Finance:
Identifying the Problems
40
By October 2005, it was becoming clear that major CTA service cuts would be
implemented if substantial increases in the operating budget did not occur. Public
statements indicated that service changes, planned for January 1, 2005, would
eliminate about 20% of the total services, affecting both bus and rail routes.
(Chicago Tribune, Oct 4, 2004) However, such cuts were not permitted to occur.
The CTA board approved a six-month postponement of major service changes
when the State legislature made the December announcement that it would
focus on transit funding solutions during the spring session. This means that the
CTA's 2005 deficit is steadily increasing as it awaits a decision from the
legislature. Consequently, if additional funding is not identified by July, even
larger service cuts will be required. Five potential alternatives were released by
the CTA in March 2005 and the specific cutback scenario was identified shortly
after.
MONOAY
APRIL 18. 2005
Figure 2.2.1: Political commentary on the recent CTA funding crisis,
(Chicago Tribune, Monday April 18, 2005)
It is possible that the necessary funding could come in the form of direct
subsidies from the state, although this is certainly not a preferred option. Illinois is
facing its own financial difficulties and, even if possible, a stopgap infusion of
State funding would do nothing to prevent future budget crises. Alternatively, the
CTA has also requested that the state consider a revision to the existing RTA
funding formula, which dates back to 1983. Such a revision could result in an
allocation of regional transit funds in a manner that is more beneficial to the CTA.
Regional Parking Fee
2.2.1 What are the Alternatives?
In March 2005, the CTA prepared to balance its budget without new funds by
identifying five potential cost reduction options. It was indicated that one would
be required if additional funding sources were not identified by July. (CTA, 2005)
Option 1:
-
Elimination of 65 weekday bus routes
-
Elimination of late night (1-4AM) rail service
Elimination of Purple Line/Evanston Express
Reduction of operating hours for most bus routes
Option 2:
- Increase in waiting time by 110% on bus system
- Elimination of overnight service on Red/Blue Lines
- Elimination of Purple Line/Evanston Express
Option 3:
-
Increase of base fare from $1.75 to $2.50
-
Increase of transfer costs from $0.25 to $0.50
Reduced fare increases from $0.85 to at least $1.25
Increase in cost of 30-day pass from $75 to $105
Increase in cost of one-day/seven-day passes
Option 4:
-
Elimination of 29 weekday bus routes
-
Reduction of service hours on approximately 1/3 of bus routes
Reduction of service hours on all rail routes
-
Increase in base fare from $1.75 to $2
-
Increase in reduced fare from $0.85 to about $1.85
Option 5:
- Replace Saturday and weekday schedules with the more limited Sunday
schedule
-
Elimination of 54 bus routes
Any of these options could have severe implications for transit riders. Ultimately,
the individual rider response will depend on specific sensitivities to increases in
transit costs and declines in service quality & quantity. In the short-run, those
that depend on transit for mobility will have no choice but to adjust their travel
patterns to the new level of service. Some will have to walk longer distances to
access the transit network while others will have to wait longer average durations
to find a space on infrequent, crowded vehicles. Both of these possibilities would
result in longer average travel times for transit riders throughout the region,
Regional Transit Finance:
Identifying the Problems
42
including those that transfer from either Metra or Pace to local CTA service.
Additionally, such a significant increase in fares will cut more deeply into
budgets. Some habitual transit riders may be forced to eliminate non-essential
trips from their routines.
Gradually, those that can afford other commute options will opt to either use the
transit system occasionally or not at all. For some, this may entail more frequent
use of an automobile that is already owned, either alone or through a carpooling
relationship. For those that had previously been able to avoid the expense of a
privately owned vehicle, the decline in transit serve may be enough incentive to
make a car purchase.
Those that are considering a future switch to transit may reconsider if the system
develops a reputation for being inconvenient, costly, and crowded. Even if
service is restored at some point in the future, it will be unlikely that all previous
riders will be attracted back to the system, especially if the earlier cuts had
served as the impetus for an automobile purchase.
Approximately a month after announcing the five scenarios, the CTA board
decided that the July service cuts would be a variation the fifth option. In
addition to the reduced service indicated earlier, the base fare would also
increase by $0.25. Given this scenario, it was estimated that wait times for
all services could increase by approximately 68%. (CTA)
It would be useful to model the potential impacts of specific changes in CTA
services and fares, both on the CTA and the suburban transit. This could include
estimations of:
- Immediate mobility loss (perhaps measured in the amount of time that it takes
to reach the Loop from various points inthe region)
- Immediate ridership loss (those for whom transit becomes infeasible or less
attractive than other modes)
- Long-run ridership loss (the loss of riders that gradually find other mobility
options more appealing)
- Immediate automobile use increase
- Long-run automobile purchase and use increase
When conducting such an analysis, it is important to remember that the existing
roadway congestion levels in the Chicago Metropolitan area are already quite
high. The Texas Transportation Institute estimates that, in 2003, Chicago-area
costs due to congestion reached $4.27 billion. Chicago is ranked third18 among
major metropolitan areas on this particular measure. An additional $1.58 billion in
congestion costs were avoided due to the existence of the public transportation
Recall that the Chicago region is currently ranked second on travel time index,
another major TTI measure of congestion.
18
Regional Parking Fee
43
system. The erosion of public transit services is certain to cause significant long
run shifts in these figures.
2.2.2 The Efficiency Question: Is the Doomsday Scenario Really
Necessary?
There remain a number of critics in the region that suggest that the service
reduction scenarios are not necessarily the only options available to the CTA.
There are claims that the CTA has not done enough to make more efficient use
of available funds and is already too heavily subsidized. However, these
arguments are not grounded in fact.
Aggregate Efficiency Levels19
It is common for transit properties to measure efficiency in terms of fare recovery.
In the case of the RTA, the 1983 Reforms actually mandated a 50% recovery
ratio for the entire system. This means that 50% of the total combined operating
expenses for Metra, CTA, and Pace must be covered by the total operating
revenues generated by the three service boards. For the year 2002, the
individual revenue recovery for the three service boards were:
Metra- 56.6%
CTA- 54%
Pace - 40%
However, the fare recovery ratio is not necessarily the best measure of actual
system efficiency. First, it only compares fare revenues with operating expenses,
rather that with total operating & capital expenses. This means that relatively
labor-dependent services, such as bus and BRT, tend to appear more expensive
than capital-intensive service such as rail transit. Additionally, average fares per
commuter rail trip tend to be significantly higher than per trip fares for bus, even if
both cover the same travel distance. So, while the recovery ratio for the
commuter rail trip may be higher, the absolute value of the subsidy is likely to be
lower for the bus service.
Since the fare recovery measure holds such a central position in the RTA
decision-making process, the fact that the recovery ratio for CTA is almost
identical to Metra's, and far higher than Pace's, should indicate that the
"inefficiency" charges are dubious. Moreover, an analysis of the CTA's 2004
operations (a combination of approximately 66% bus and 33% heavy rail)
indicated that the average operating subsidy per trip was $0.93. This is very low
when compared with the average per-trip operating subsidies for either Metra or
Pace, which are $2.48 and $2.29, respectively. The CTA fares even better when
compared with the national averages for bus and heavy rail, which are $1.70 and
$.66 respectively. An agency with these efficiency characteristics but with a
19
This section relies heavily upon the findings of William Anderson, 2004
Regional Transit Finance:
Identifying the Problems
44
bus/rail mix similar to the CTA's would have an average operating subsidy per
trip of approximately $1.34.
Additionally, the recovery ratio does not measure transit's actual level of service.
A transit agency that raises fares and eliminates certain routes might be able
achieve higher revenue recovery rates, but its contribution to regional mobility
levels is likely to decline as a result. It is in this way that the recovery ratio is a
poor measure of actual public transit goals. Annual changes in total ridership,
vehicle hours, or passenger miles could serve as more accurate measures of
service levels.
Diversion of Capital
There have been some suggestions that the CTA use a portion of its capital
funding to help close any gaps in the operating budget. Specifically, the RTA
proposed that as much as $300 million be diverted from capital to operations
over the next three years. (CTA Capital Plan, 2005) After all, if the operations
scenario is so dire, then it should be worth the postponement of construction
projects and equipment purchases. However, with each year that needed capital
investments are postponed, the system moves farther away from a state of good
repair. When the system is plagued by aging, poorly functioning equipment, it
becomes more expensive for operators and maintenance personnel to effectively
do their jobs. Furthermore, such a temporary funding solution is clearly not a
remedy for chronic funding shortfalls. The operations funding challenge will
certainly not get any easier over the next three years. Additionally, the CTA's
capital funding outlook is not much more promising than the operations situation.
As the CTA prepared its capital budget for the 2005 fiscal year, it was notified by
the RTA that $130 million in Illinois First funding would no longer be available. As
a result, the CTA is struggling with difficult shortfalls in both operations and
capital funding.
In the end, it is reasonable to assume that the CTA has no other options. There
are already significant efforts to achieve greater efficiencies and the proposed
service cuts should not perceived as just a "bluff." This reality could have major
implications for the region. As demonstrated above, many have lost sight of the
regional perspective. However, transportation is inherently a regional concern
and there will be larger impacts if the CTA is left to face these budgetary
challenges alone.
2.3
Chapter Summary
Before leaping into an analysis of the parking fee, it is important to realize why
such a funding strategy is necessary. The past few decades of Chicagoland
transit finance history has been characterized by strong intraregional tensions.
The current CTA budget crisis is just the latest indication of serious flaws in the
RTA operations funding process. The reliability of funding levels is poor and
Regional Parking Fee
45
there is very little focus on the actual performance of the network. Chicagoland's
transit finance problems must be dealt with in more than just a stopgap fashion if
major ridership losses are to be avoided.
Regional Transit Finance:
Identifying the Problems
46
3 Identifying Solutions: A True Regional Mentality
"Americans will always cooperate - only after they have exhausted all of the
alternatives." Winston Churchill
3.1
Regional Trends in Metro Chicago
The previous chapter highlighted the tensions between the urban core and the
suburbs regarding public transit finance. The existence of such intense
intraregional political conflict leads one to naturally assume that stark differences
exist between Chicago's urban core and suburbs. However, such a view is far
from accurate and should not form the basis of policy decisions.
It is undeniable that suburban Chicago has been growing at a high rate. In
addition to having an average suburban growth rate of 16%, the area boasts its
20
own "boomburb," Naperville, which grew 1,730% over the past 50 years.
However, at the same time that the overall suburban population has been
growing, there are a number of individual suburban municipalities throughout the
Chicago Metropolitan region that have experienced population declines.
Specifically, there were 28 municipalities, or 13.2% of the total municipalities in
the Chicago area, that showed population loss during the 1990s. On average,
these municipalities experienced declines of 3.8%. (Lucy & Phillips, 2003)
Additionally, the Chicago suburbs have experienced growth in racial and ethnic
diversity that is most commonly associated with urban areas.
To further complicate the picture, the 2000 US Census reveals that Chicago is
one of the only cities that have demonstrated an urban renaissance, at least in
terms of population trend reversals. Out of the 100 largest cities in the United
States, Chicago was one of only 5 that countered urban population losses during
the 1970s and 1980s21 with significant population gains during the 1990s.
Specifically, during the period 1990-2000 Chicago experienced average urban
population gains of 4%.
Specifically, boomburb is defined as (1) a city larger than 100,000 (2) not the
largest central city in the metropolitan area and (3) has experienced growth rates
of 10% or greater for each decade since 1950. The Naperville case is particularly
unusual in that boomburbs are almost exclusively found in the Southern and
Western parts of the US.
21 Overall, Chicago lost 361,885 residents during the 1970s (decline of 10.7%)
and 221,346 during the 1980s (decline of 7.4%).
20
Regional Parking Fee
opulatlon Change
# of People
-1,700 to 0
Oto 38,000
38,000 to 80,000
n80,O0 to 100,000
0
100,000 to 150,115
18
12
6
1980 to 2000
Mites
own/City Level)
Figure 3.1.1: Absolute population change values at the municipality level,
1990-2000 (US Census)
Identifying Solutions: A True Regional Mentality
Population Change
Percentage
W
0
-54%to 0
SOto7%
7%to 16.5%
16.5%to 29.33%
29.33%to 98.78%
E3Other
18
12
6
Miles
1990 tO 2000 IfTown/City Level I
Figure 3.1.2: Percent population change at the municipality level, 1990-2000
(US Census)
This trend is even more surprising considering the fact that major growth during
this period was much more common for auto-oriented cities.22 A closer
examination reveals that much of Chicago's growth came from the rapid
increases in downtown population. During the 1990s, the downtown areas of
Chicago grew by 51.4%. (Sohmer & Lang, 2003) Consequently, Chicago's
success in recent years cannot just be depicted as a suburban story.
Glaeser and Shapiro (2003, pp. 28-29) found that, on average, cities that had
less than 65% of commuters driving alone to work experienced the lowest
average growth while cities with over 80% of commuters driving alone
experienced average growth rates of at least 15% (over the period 1990-2000).
22
Regional Parking Fee
49
In the Chicago Metropolitan area, the dividing line between traditional "suburban"
and "urban" issues is becoming increasingly blurred. According to Greenstein &
Wiewel:
"Positing an urban-suburban dichotomy implies a political choice that may be at
odds with reality and may serve to alienate potential allies within a region. The
metropolitan landscape has become too complex and variegated to be captured
in a simple duality." (2003)
In Chicago, as with many other US cities, there is no such thing as a common
"suburban experience." Orfield views this reality as an opportunity to foster new
political coalitions that ignore traditional dividing lines. For example, he suggests
that places as seemingly diverse as central cities, inner suburbs, and low taxbase developing suburbs all can - and should - find common ground on regional
transportation issues. (Orfield, 1998)
3.2
Potential Regional Cooperation
As discussed in the previous chapter, the establishment of the RTA represented
an effort to make transit a more regional concern. It held the promise of greater
regional independence from the State. While regional coordination was the
stated goal, true cooperation has been rare in practice. Instead, relations within
the RTA are more commonly characterized by urban-suburban conflict and
accusations that "others" are getting more than the fair share. Even fare
integration between the three service boards, an initiative that presumably will
benefit everyone, has seen limited progress. This, of course, is reinforced by a
general sense that interests throughout the region are naturally at odds.
However, as illustrated by the recent census findings cited above, the city-urban
divide in the Chicago Metropolitan Area is becoming less defined. It is
increasingly difficult to specify problems as solely of a suburban nature or solely
of an urban nature. Population loss, population growth, congestion, poverty, and
crime are not concentrated in any one part of the region. The suburbs are
experiencing increasing polarization. (Orfield, 1998) This should be viewed as an
opportunity to refocus the political perspective and to strengthen the
effectiveness of existing regional bodies such as the RTA.
3.3
Regional Transportation Planning: Modes and Land Use
Since the movement of people & goods is not restricted by municipal political
boundaries, transportation is inherently a regional concern. While there is an
ongoing debate regarding the merits of broad regional government, the
management of transportation systems on a regional scale tends to be less
Although this was not fulfilled, largely because a sufficient independent source
of dedicated funding was not properly established. This will be explored in much
greater detail at the end of this chapter.
23
Identifying Solutions: A True Regional Mentality
controversial. As Wachs & Dill (1997) explain, such a mindset was already in
place during the early days of highway planning and investment. Before WWII,
there were voluntary efforts to coordinate these activities in many regions
throughout the country, although results were generally limited by the lack of
sufficient dedicated funding. The postwar era brought a dramatic increase in
regional transportation funding from the federal and state levels, particularly for
highway, although this generally meant that federal and state design guidelines
superceded regional plans. It was not until the 1970s and 1980s that there were
significant efforts to coordinate highway and transit planning. Prior to this time,
regional transit planning had been more commonly coordinated with nontransport regional services such as sanitation. Overall, the regional approach to
highway construction was much more technical and the regional approach to
transit was generally much more political. Government funding for each was kept
separate. It was not until the Federal Intermodal Surface Transportation
Efficiency Act (ISTEA) was passed in 1991 that metropolitan planning
organizations gained flexibility in allocated funds between highway and transit
projects.
Throughout the post-WWII period, regional approaches to transportation
problems have been largely influenced by decisions made at the federal and
state levels. Consequently, most regional organizations often do not truly have
ownership over regional issues. Regional transportation planning in the Chicago
Metropolitan Area tends to fit this characterization. Despite the existence of the
Chicago Area Transportation Study (CATS), 24 transportation funds do not
necessarily reach areas of greatest need. For instance, an analysis of
Chicagoland highway projects during the period 1984-1994 found that state
funding was overwhelmingly directed in ways that favored the wealthy, lowdensity, outer suburbs at the expense of increasingly impoverished parts of the
region. (Orfield, 1998) While ISTEA and its subsequent reauthorization legislation
may have made the approach slightly more balanced, funding inequities still
persist.
While a necessary component of any regional strategy, a more balanced
approach to regional transportation finance will not guarantee greater regional
mobility. The freedom to shift highway funding towards transit initiatives (and vice
versa) means very little if the option to "flex" is not used or resultant
transportation infrastructure does not bring travelers from where they are to
where they want to go. The location of residential, commercial, and retail
development (i.e., the origins and destinations for most trips) influences the
degree to which innovative regional planning can be effective.
CATS is the metropolitan planning organization (MPO) responsible for
allocating funds to specific transportation projects. Theoretically, CATS is
concerned with balanced development throughout the entire region.
24
Regional Parking Fee
There is an ongoing debate over the potential outcomes of transportation and
land use planning coordination. It has been hypothesized that the way in which
land is developed has a direct impact on travel behavior and mobility. For
instance, Cervero has conducted a number of studies exploring the relationship
between development patterns in the suburbs and the relative mobility levels of
these areas. (Cervero, 1989) Although this makes sense theoretically, some
researchers claim that the scientific evidence for causal connections is somewhat
weak (Crane, 1999). While there are correlations between urban spatial form and
the manner in which people choose to travel, causality is a much more difficult
thing to prove. In response to this critique, proponents of the land use-travel
behavior connection argue that the inconclusive nature of most studies may
actually be due to flaws in research methodology and a lack of suitable case
studies. In other words, there are just not enough good examples of high-density,
mixed-use, pedestrian-friendly developments that actually serve a wide crosssection of the general public. Levine & Inam (2004) suggest that the lack of
appropriate study cases does not mean that this type of development is
inherently unmarketable; rather, government land use regulations in most areas
have actually served to indirectly encourage auto-dependent development. This
includes regulation that dictates low development densities, separation of uses,
and minimum parking requirements. A developer that is required to build below a
predetermined Floor Area Ratio (FAR) 25 and provide a certain minimum number
of parking spaces has little freedom to design for pedestrian mobility and transit
accessibility. By providing developers with greater flexibility on these matters, it
at least opens up the opportunity for a wider variety of travel choices. More
innovative development approaches can also be encouraged if the general area
already boasts essential mobility features such as sidewalks, bike lanes, and bus
service.
In November 2004, the City of Chicago passed a revision of its zoning ordinance.
While the new language was far from revolutionary and was largely open to
interpretation, the new regulations did have special provisions for transitaccessible developments. Specifically, developments within a certain distance of
CTA or Metra stations could face lower overall parking requirements:
"In B, C or D districts, minimum off-street parking ratios are reduced by 50
percent from the otherwise applicable standards for rehabilitation or reuse of
existing structures located within 600 feet of a CTA or METRA rail station
entrance... For new construction in such locations, the Commissioner of the
Department of Planning and Development is authorized to approve off-street
parking ratio reductions of up to 25 percent if the Commissioner determines,
based on information provided by the applicant, that transit use and alternatives
to private automobile use will be actively promoted and/or that other factors are
FAR: the ratio of the gross floor area of a building to the total area of the site.
FAR regulations are often used to limit development density levels.
25
Identifying Solutions: A True Regional Mentality
likely to result in automobile ownership rates that are lower than indicated by
applicable off-street parking ratios." (City of Chicago, 2004)
Of course, this does not address bus accessibility nor does it automatically
guarantee requirement reductions for new developments in these areas.
However, it represents recognition of a potential connection between land use
and transportation, a step that is relatively unique. Of course, the true test of its
effectiveness would come if the relaxed transit-oriented zoning provisions were
extended throughout the entire region. If every developer throughout the RTA
service area had an incentive to support non-auto based accessibility, actual
changes in development patterns might be observed.26 However, the possibility
that Kane, Lake, DuPage, McHenry, and Will Counties would all embrace such
changes is unlikely, at least within the near future.
3.4
Justifications for Regional Cooperation
While the history of regional transportation planning, both in the Chicago area
and elsewhere, has been somewhat disappointing, this does not mean that
regionalism does not still have numerous (and vocal) advocates. For them, a
focused regional approach can have extensive benefits, both from the suburban
and urban perspectives. In order to build more solid support for RTA activities, it
is necessary that the merits of regional coordination be seriously considered. The
three major justifications, as outlined by Summers (2000) are:
3.4.1 Efficiency
One of the most basic arguments for regional coordination is that more
fragmented approaches to governance can often be inefficient. The strength of
this stance obviously depends on the specific focus of the regional effort. While
there are certain public services that do not fit so easily into this mold, the
complexity and inherent regional nature of transportation makes it a good
candidate for this argument. Of course, many potential efficiencies could be
easily lost if the organization must also manage frequent intra-regional
disagreements.
3.4.2 Equity/Redistribution
Historically, proponents of regionalism have also cited equity as one of the target
benefits. A regional structure can enable more equitable distribution of resources
and equitable access to services. While this argument is obviously popular in the
less wealthy parts of the region, those that perceive themselves as making a
disproportionately large contribution to the regional pot are generally less
enthralled with the idea. Often, this is the main source of transit-related
These issues will be revisited in Chapter 5, when the actual incidence and
magnitude of the parking fee is examined. Also, for a more detailed exploration of
the relationship between parking policies, real estate development, and
accessibility, please see the 2005 MIT Masters thesis by Heather Richardson.
26
Regional Parking Fee
53
suburban-urban conflict. Suburban residents and businesses naturally wonder
why they should support a system that provides them with very few direct
benefits. Although a legitimate argument, it tends to be the least effective
justification for regionalism.
3.4.3 Interdependence
In recent years, there has been a growing focus on the interdependence of
municipalities as a justification for regional cooperation. There are two major
components of this argument: (1) the economic health of the suburbs is
dependent on the health of the central city and (2) regional cooperation is
necessary for success in an increasingly global economy.
Economic Health
The older strand of the interdependency argument emphasizes linkages in
economic health between localities throughout a region. For instance, in a
number of studies, Voith explored the relationship between suburban and urban
economic change within a region. While his initial efforts indicted a positive
correlation between city and suburban growth in recent decades 27, a causal
relationship (specifically one that indicates city impacts on suburbs, rather than
vice versa) was not confirmed. Researchers such as Bennett Harrison (1998)
and Todd Swanstrom (2001)28 have cited this as one of the major flaws of the
interdependency argument.
However, Voith's more recent efforts to eliminate potential confounding factors
(1998) have started to build evidence that the economic health of the city does, in
fact, have a positive effect on suburban incomes and housing price growth.
Hollar's export price shock analysis (2003) went one step further in trying to
distinguish between exogenous economic shocks on the city center and the
suburbs. This work found that the employment growth in central cities, especially
in larger cities, has a very significant positive impact on suburban employment
In additional to finding positive correlations in the past few decades, Voith has
also observed that earlier decades featured a negative correlation. Thus, in the
early years of rapid suburbanization, the fortunes of the suburbs and the urban
core seemed to have been diverging in the short-run. But, ultimately, the long-run
economic performances of localities across the region become more closely
linked.
28 Asserting that even efforts to use multiple regression to determine
interdependence are still somewhat unreliable, Swanstrom suggests that the
economic argument for regionalism is limited and regionalists should instead
appeal to popular American support for political equality, civic tolerance, and
local liberty. While the author agrees that these are important issues that must be
incorporated into the larger regionalism framework, it still appears as though
Swanstrom too quickly dismisses the recent progress made in economic
interdependence arguments.
27
Identifying Solutions: A True Regional Mentality
growth29 and ultimately reinforced the idea that cities and their suburbs should
perceive themselves as economic allies rather than rivals. Of course, if the
suburbs are reaping such large benefit from their proximity to an economically
vibrant urban core serviced by an extensive transit system, one begins to wonder
if the suburbs are paying enough for these benefits.
Other recent studies have reinforcing the idea that the metropolitan region is
economically interdependent. For instance, Hewings, Okuyama, and Sonis
(2001) used an extended input-output framework 30 to demonstrate that there is
substantial economic interdependence between different sub-regions with the
Chicago Metropolitan Area. The key drivers of this phenomenon are the high
rates of (1) commuter movement (people are not living and working within the
same sub-regions) and (2) income movement (people are not living and
spending their money within the same sub-region). The authors conclude that
this is one indication that investment in certain parts of the metropolitan area
(such as the inner city) should be expected to have significant spillover effects on
incomes throughout other regions (such as the suburbs).
Global Competitiveness
A more recent strand of the interdependency theory argues that regional
coordination is a prerequisite for competitiveness in the new global economy.
This is often based on the idea that a major feature of globalization is the growing
importance of regional clusters. Porter defines clusters as "geographic
concentrations of interconnected companies and institutions in a particular field.
Clusters encompass an array of linked industries and other entities important to
competition."(Porter, 1998, p. 2) Such clusters enable better access to
knowledge and relationships, both of which are increasingly crucial in an
economy where virtually all companies are seeking greater access to
technological advancements. "In fact, there is no such thing as a low-tech
industry. There are only low-tech companies, that is, companies that fail to use
world-class technology and practices to enhance productivity and innovation."
(Porter, 1998, p. 9)
The quality of human capital in a region can be a major determinant in the
formation of such clusters. Innovative companies and institutions seek intelligent
"idea generators" and are thus more likely to locate in areas with a highly
educated workforce base. Consequently, regions that hope to attract innovative
industries must first focus on creating high quality places that appeal to talented
and creative workers. Two features that often matter most to this population
include:
Growth in suburban employment also had a positive impact on urban
employment growth, but the effect is not nearly as large, especially in regions
with larger central cities.
30
The framework incorporated production, employment, and income
components.
29
Regional Parking Fee
55
The integration of live-work-learn-play activities in a collection of vibrant,
diverse communities
- Transportation connectivity that enables easy and quick mobility across
the region
-
Both of these features seem less likely to occur in regions that are sprawling,
highly congested with an uncoordinated approach to transportation planning.
(Florida, 2005)
From this point of view, the commute travel time statistics for the Chicago region
is certainly not encouraging. The average change in commute travel time over
the past decade was an increase of 3.1 minutes. (McGuckin & Srinivasan, 2003).
Figures 3.4.1 and 3.4.2 shows how the automobile-based component of these
increases has been dispersed across the region.
Commute Time Change
Minutes
-6.6975 to 0.0000
0.0000 to 4.2600
4.2600 to 6.7200
6.7200 to 11.6300
11.6300 to 26.0652
Other
0
Ato
Identifying Solutions: A True Regional Mentality
7
14
21
Miles
Mode by Destination:1990 to 2000
Figure 3.4.1: Absolute change in average automobile work commute time
by destination municipality (US Census)
Comute Time Change
-K N ALL
L
Minutes
-3.0301 to 0.0000
0.0000 to 1.9900
1.9900 to 3.5200
3.5200 to 5.7000
5.7000 to 13.7977
O3ther
C-1
D
I
KI
nV
~~Aut
yOrg
19o
20018
Figure 3.4.2: Absolute change in average automobile work commute time
by origin municipality (US Census)
Over the past three decades, the share of commute trips that are very long (>45
minutes) has increased in all parts of the region while the share of trips that are
categorized as short (<15 minutes) has declined.
Regional Parking Fee
Commutes more than 45 minutes (as percentage of
total commutes)
1980
1990
2000
Central
Suburban
24.2%
16.9%
23.9%
18.8%/0
27.2%
22.5%
Ex-urban
7.7%
12.3%
17.7%
Table 3.4.3-1: Very long commutes as share of Chicagoland total commutes
(McGuckin & Srinivasan, 2003)
Commutes less than 15 minutes (as percentage of
total commutes)
Central
Suburban
1980
20.8%
31.0%
1990
19.8%
28.1%
2000
17.6%
24.8%
Ex-urban
45.7%
42.3%
36.3%
Table 3.4.3-2: Very short commutes as share of Chicagoland total
commutes (McGuckin & Srinivasan, 2003)
To fully understand what this means for Chicago's competitiveness, it is useful to
consider at least one measure of relative mobility. Every year, the Texas
Transportation Institute (TTI) determines travel time index values for major US
metropolitan areas. This number indicates the amount of extra travel time
needed for a peak hour trip versus a trip made in free flow traffic. In 1983,
Chicago had the seventh highest travel time index in the nation, suggesting that
mobility was worse than the following six urban areas:
Identifying Solutions: A True Regional Mentality
58
Ridership
Change
(19832003)
Travel Time
Index
Change
(19832003)
Location
1983
Travel
Time Index
Ranking
1983
Travel
Time Index
Value
Houston
1
1.32
86%
33%
Santa Ana CA
2
1.31
54%
34%
San Jose
San
Francisco-
3
1.22
24%
12%
Oakland CA
4
1.22
11%
26%
5
1.19
186%
12%
DC-VA-MD
6
1.18
58%
28%
Chicago
7
1.18
-6%31
33%
Los AngelesLong Beach-
Tampa-St.
Petersburg
FL
Washington
Table 3.4.3-3: Travel Time Index Comparison, Highest Seven Municipal
Areas in 1983 (TTI, 2005) 32
Over the following two decades, Chicago's travel time index increased by 33%.
At the same time, it was the only one of the seven areas listed in Table 3.4.3-3
that did not experience growth in transit ridership. By 2003, Chicagoland had a
travel time index of 1.57, resulting in a national second place ranking. This places
Chicagoland at a greater disadvantage when trying to compete with the
metropolitan areas of San Francisco, Houston, and Washington, DC.
31 While the TTI places Chicagoland ridership loss at -6%, official RTA figures for
1980-2005 indicate a loss greater than -30%. The larger number simply sets the
Chicago area at an even greater disadvantage when compared with its peers.
Regional Parking Fee
Location
Los AngelesLong BeachSanta Ana CA
Chicago
San
FranciscoOakland CA
Washington
DC-VA-MD
2003
Travel
Time Index
Ranking
2003
Travel
Time Index
Value
1
2
1.75
1.57
3
1.54
4
1.51
Atlanta
5
1.46
Miami
Houston
6
6
1.42
1.42
Table 3.4.3-4: Travel Time Index Comparison, Highest Seven Municipal
Areas in 2003 (TTI)
Overall, a greater focus on region-wide cooperation will make metropolitan areas
better prepared to promote and manage the complex relationships associated
with globalization. Ultimately, the region that is overly preoccupied with
intraregional conflict could potentially be left behind in an economy in which
political boundaries have very little importance.
In short, to the degree that there is a recognition that economic competition is not
between Schaumburg and the Loop but actually between Chicagoland and
places like the San Francisco Bay Area, it would be proactive to focus on
growing congestion as the enemy of regional economic growth.
3.5
Regionalism: Translation to Transit Finance Policy
If we accept the idea that different parts of the region can - and should - share
common goals, it then becomes necessary to determine how this can be
translated into policy. A first step would be to eliminate artificial conceptions of
"urban" vs. "suburban" interests from the political landscape. The existing RTA
funding formula reinforces the artificial divisions between suburban and urban
goals. Rather than redistributing funds to those that can use it most effectively,
there is a rigid relationship between locus of sales tax collection and locus of
rider residence. This strict division of funding was largely influenced by the
intraregional politics of the early 1980s and has very little connection with mobility
needs. In order to bridge the suburban-urban divide, the finance structure should
begin to reflect the true interdependencies. However, it is clear that major
alterations in the existing funding formula may be perceived as too drastic a step,
at least in the beginning. The debate over distribution restructuring has raged
from a very long time and opposing opinions are fully entrenched. From a
Identifying Solutions: A True Regional Mentality
political feasibility perspective, it would be useful, if possible, to pursue options
that avoid passionate opposition.
If we choose to approach this problem from a regional perspective, there are
some funding options that are entirely inappropriate. For instance, an increase in
Chicago and Cook County municipal contributions to CTA operations (which has
remained at $5 million since the 1970s) would contradict the notion that the
health of the transit system is a regional concern. Similarly, an arbitrary
redistribution of funds that disproportionately benefits one transit board would
also reinforce the divisive politics that already permeate the region. Finally,
temporary redistribution of funds from capital budgets to operating budgets is a
short-term solution that ultimately reduces the capacity for enhancing the
connectivity of the overall network.
Rather than wasting valuable energy & time on the endless "Who gets more?"
argument, efforts could be focused on a coordinated region-wide effort to
generate more resources for the entire area. While recent events make it seem
as though CTA is the lone service board in need of additional operating funds,
both Metra and Pace could certainly benefit from an enlargement of the funding
pool. For instance, Metra's long-term capital expansion plans will almost certainly
place it in a position of increasing subsidy needs. According to Metra's 2005
budget, the commuter rail hopes to embark on a few major network expansion
efforts over the next few years (Metra, 2005):
* Construction of the STAR (Suburban Transit Access Route), a 55-mile rail
connection from O'Hare Airport to Joliet.
* Construction of the SES (Southeast Service Line), a rail connection
between the town of Crete and the LaSalle Street Station in Chicago
* Extension of the Union Pacific Northwest Line to Johnsburg (McHenry
County)
Given Metra's average per-trip subsidy requirement (examined in section 2.2.2),
such massive system expansions will surely necessitate a larger operating
budget. Metra should be willing to pursue increases funding levels now, well
before the possibility of their own budget crisis.
3.6
The Common Goal: Enlarging the Funding Pool
3.6.1 Benefits of a new dedicated funding source
Given regional conditions, the best strategy is to identify ways in which the entire
RTA system can independently generate more overall revenue. While pursuit of
more state subsidy is also an option, it is unlikely that the legislature will offer
anything more reliable than stopgap cures. While a large influx of state dollars
may solve this year's problems, the future sustainability of the system will still be
Regional Parking Fee
in jeopardy. Ultimately, an additional dedicated funding source with flexibility for
future growth is necessary to ensure long-term financial security and enable
longer planning horizons.
Of course, a new source of funding will not be without controversy. There is
always the danger that the distribution of this new source will become yet another
contentious political issue. In the beginning, when the additional revenues start
coming in, there will be a perception of newfound abundance and everyone will
queue up for a portion. However, this could prematurely stretch the funding
stream to capacity. While this may be less likely in a situation of crisis (even
though there are new funds, much will already be earmarked for basic
maintenance of service levels), it may make people think that the situation is less
crucial than it really is. This will be especially true in the case that it will be an
RTA funding source, not just a source specific for CTA.
Care should be taken to ensure that the generation of new revenues will not
make inter-agency relations more divisive; rather it should be viewed as an
opportunity to achieve a greater sense of common purpose throughout the RTA
service area.33
However, the identification of an additional funding source that provides sufficient
revenue streams and is politically feasible is obviously much easier said than
done.
3.6.2 Funding Option: Increasing Collar County Sales Tax Rates
One of the more widely discussed funding options has been the reformulation of
existing sales tax rates. As discussed earlier, the 1979 reforms lead to a tiered
structure in which the City and Cook County pay a 1 % sales tax to support transit
while the collar counties faces rates of .25%. This has ensured that wealthier
parts of the region contribute the least amount and annual revenues are
consistently insufficient to cover the actual costs of operating a healthy regional
system. Recall that the relative efficiencies analysis presented in Chapter 2
indicated that both Metra and Pace receive much higher per-passenger subsidies
than the CTA. Consequently, the average collar county transit passenger pays
lower sales tax rates and receives higher transit subsidies than the average Cook
County resident. (Anderson, 2004) An increase in the collar county percent
contribution could be a significant improvement over the current situation.
According to Kirschbaum (2004), increasing the sales tax levels in the collar
counties would have the following annual revenue potential:
Potential distribution strategies are covered in Chapter 6: Implementation
Challenges.
33
Identifying Solutions: A True Regional Mentality
Additional Revenue Generated by Sales Tax Rate increases (all Collar Counties)
.5% Collar
/1%Cook,
Total
$128,746,000
1%Cook, .75% Collar
1%Cook, 1% Collar
$386,239,000
$257,492,000
Additional Revenue Generated By Sales Tax Increases (just DuPage)
1%Cook, .5% Collar
Total
$54,073,740
1%Cook, .75% Collar
$108,146,480
1%Cook, 1% Collar
$162,220,220
Additional Revenue Generated By Sales Tax Increases (just DuPage & Lake)
1 % Cook, .5% Collar
Total
$86,260,000
1%Cook, .75% Collar
$172,520,000
1%Cook, 1% Collar
$258,780,000
Table 3.6.2-1: Revenue generation potential of various sales tax increase
scenarios (Kirschbaum, 2004)
Although this is a technically feasible alternative that could be easily
implemented by a pre-existing administrative structure, it may not be the most
realistic option. Over the years, a formidable coalition has gathered in opposition
to this option. The suburban retail sector opposes it because it could reduce the
advantage it has over Cook County and City businesses. Suburban residents
oppose it because it could cause increases in the cost of goods. Additionally, for
many, there is still the fundamental belief that the suburbs should not pay any
more for a service that they rarely, if ever, use. It is increasingly doubtful that
regional stakeholders will experience a change of heart and embrace even the
most modest restructuring proposals. Given current attitudes toward restructuring
schemes and the urgent need for financial improvement, it is useful to bring other
ideas to the table.
3.6.3 Funding Alternative: Regional Parking Fee
Another potential solution is the use of a regional parking fee to augment regional
transit operating funds. While it has been informally discussed as a funding
alternative, a parking fee has not yet been the focus of a formal public
discussion. If its merits are widely understood, it should stand a better chance of
gaining region-wide support than the controversial sales tax proposals.
A number of US cities including Chicago, Los Angeles, Miami, New Orleans,
Pittsburgh, San Francisco, and Santa Monica have implemented parking taxes.
(Berk & Associates, 2002) However, these are generally limited to facilities within
city boundaries that actually charge customers for parking. In contrast, the
preferred approach for Chicagoland would impose a relatively minimal per space
monthly rate on all non-residential parking facilities, including those that typically
claim tax-exemption.
Regional Parking Fee
63
Unlike the parking taxes that have been implemented in other US locations, a
regional parking fee structured in this manner would have a stronger rational
nexus with congestion externalities. After all, the fact that one facility owner is
collecting higher revenues than another does not necessarily mean that he is
making a larger contribution to regional congestion levels. In fact, a citysubsidized lot is actually more likely to encourage auto-dependence than a forfee private facility. However, it is easier to conclude that a property owner
providing enough parking spaces for 30 cars is making a larger contribution to
regional congestion levels than one providing enough spaces for 20 cars,
regardless of whether any revenue is actually generated. Equally important, such
a broad-based fee could generate enough revenue to help sustain a high quality
of transit service without creating significant financial burden for Chicagoland
residents.
Earlier efforts to estimate the financial benefits of a regional parking fee were
somewhat discouraged by the lack of accurate data on Chicagoland parking
supply. Obviously, to conduct an inventory of all commercial parking spaces
within the six county area would be a daunting task for any researcher or agency.
Fortunately, the exact number of spaces need not be known to determine the
effectiveness of a parking fee; rather it is sufficient to simply know the magnitude
of parking supply. If the general magnitude is known, it will be easy to determine
the range of fees required to achieve funding goals.
As part of its own efforts to explore the parking fee option, the CTA has made the
following rough estimations for parking supply within the City of Chicago:
Gross Bldg Floor Area
(gfa) 2
Avg spaces/1 000sf
3
Total parking (est)
ChiCBD public parking
1
City Retail
ChiCBD Office
City Industrial
Millennium
garage 4
Parking meters5
11,402,228
5
100,000
57,011
117,436,716
1,177,575,049
2.0
0.75
234,873
883,181
Park
City of Chicago
2,181
28,416
CITYTOTAL
1,3
Table 3.6.3-1: City of Chicago parking supply estimates (CTA)
Since it is still questionable whether parking meters should be included in the
overall count, it will be assumed that the number of eligible spaces within the City
of Chicago is approximately 1,277,000.
Identifying Solutions: A True Regional Mentality
The CTA also attempted to estimate the number of spaces in the six suburban
counties, using a combination of census and real estate data:
per
Total parking spaces
(est)
2,527,682
1.1557
2,921,242
Gross Bldg Floor Area (qfa)
Avg spaces/1000 Sgf.
Total parking (est)
97,730,253
10
977,303
Employed
driving to work
Suburban
Commercial*
Suburban
Retail**
Residents
Parking
worker
Spaces
SUBURBTOTAL
3,898,545
Table 3.6.3-2: Chicago area suburban parking space supply estimates
(CTA)
While the methodology appears reasonable, it is always best to check for
potential points of criticism. For instance, the CTA's use of "employed suburban
residents driving to work" as a proxy for suburban parking space requirements
could be questioned on the basis that some suburban residents actually
commute into the city, thus resulting in a potential over-estimation of the
suburban parking supply. This critique can be countered in two ways:
1) Recent census data show that there are a similar number of urban residents
traveling to the suburbs for work as there are of suburban residents commuting
to the city, thus reducing the possibility that the CTA estimates double-count
parking spaces. Specifically, the share of commuters that travel from the city to
the suburbs is 11.1% and the share of commuters that travel from the suburbs to
the city is 13.9%. This suggests that the magnitude of required spaces in the
suburbs roughly the same. (Brookings Institution, Metropolitan Policy Program)
2) A more detailed picture of the regional parking supply can be obtained by
examining the journey to work data from the 2000 US Census.
Regional Parking Fee
65
141,055
444,865
132,435
14,605
40,320
12,565
2, [1U
7,145
2,190
2,42U
5,120
1,300
1,615,075
77,330
254,990
2,665,750
220,575
8,175
26,500
322,740
41,220
1,720
5,380
60,365
29,515
955
3,910
43,220
Table 3.6.3-3: Commute journey to work by driving mode and place of
employment (2000 US Census)
By taking these totals and calculating the number of total car trips produced 34,
more accurate estimations of the parking supply in individual suburbs can be
obtained. If at least one space were required for each car traveling to suburban
work destinations, the minimum number of suburban spaces would be:
C
149,866
468,687
139,773
82,230
4
x
O~k
271,011
1,022,468
17o~d2,134,03
Table 3.6.3-4: Suburban parking requirement estimations based on driving
mode and place of employment
Since these assume just one place per employee vehicle, it is almost certainly
undercounting the actual number of spaces in the suburbs. Even non-retail uses
will provide additional spaces for customers and visitors, especially since the cost
of constructing surface spaces in the suburbs is relatively low. The CTA's
calculations use a multiplier of 1.1557 to estimate the number of required spaces
from the known number of employees. Since the journey to work method already
eliminates the need to discount for other employee transportation modes, it is
reasonable to use an even higher parking space multiplier. Just by multiplying
the number of spaces required for employees by a multiplier of 1.3, it is found
that the estimated number of spaces is over 2.77 million.
This alternate approach to suburban parking space calculation confirms that the
original CTA calculations are of the correct magnitude. For the remainder of this
Simply calculated by dividing the number of trips for a particular mode by the
number of riders in each automobile. So, for instance, the number of car trips
produced by 14,605 2-person carpool commutes is 14,605/2 = 7,303.
34
Identifying Solutions: A True Regional Mentality
thesis, it will be assumed that the sum of suburban and urban eligible parking
spaces is at least 4 million.
Using the base estimate of 4 million eligible spaces, a range of potential parking
fee rates could generate the following revenue amounts:
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$144,000,000
$192,000,000
$240,000,000
$288,000,000
$336,000,000
$384,000,000
$432,000,000
Table 3.6.3-5: Range of potential annual parking fee revenues, based on
monthly per space rates of $3-$9
Tables 3.6.2-1 and 3.6.3-5 demonstrate that the sales tax increase and the
parking fee are comparable revenue generators.
While the application of the fee to such a large number of spaces certainly
supports a more regional approach to transit finance, it also enhances the
revenue generation potential. Although non-residential parking fees have not yet
been attempted in the US, the concept has taken hold in both Sydney and Perth,
Australia. However, the implementation areas in both cities are geographically
limited, specifically to the urban downtowns. As a result, both of the existing case
studies in Australia collect annual revenues significantly less that what would be
required within the Chicagoland context.
It is important to remember that, in addition to its potential as a revenue
generator, a parking charge can also be perceived as a travel demand
management tool. Theoretically, if fee rates cause large enough increases in
auto travel costs, drivers would be tempted to switch to other modes. However,
at this stage, travel demand should not be an initial focus of an RTAadministered parking fee. Currently, the greatest concern is maintenance of the
existing level of service. The fee needs to be high enough to generate a sufficient
level of income, but not so high that it encounters major political opposition. If the
rates were actually high enough to significantly impact travel behavior, it would
have a substantially less likelihood of public approval. From this perspective, it is
wise to minimize the driver perception of the fee. The implications of this
approach will be explored in the following chapters.
A more in-depth (property and customer levels) comparison between both
options appears in Chapter 5.
3
Regional Parking Fee
67
3.7
Chapter Summary
In Chicagoland, the notion of an urban-suburban divide is an oversimplification of
reality. In order to prosper as a region, everyone must realize that congestion is a
common enemy that can only be defeated through a unified effort. Under such
conditions, it is necessary to identify a transit finance strategy that both reflects
regional interdependencies and generates enough revenue to have a significant
impact on overall mobility levels. While other options are available, a regionwide, non-residential parking fee comes the closest to meeting these needs.
Identifying Solutions: A True Regional Mentality
4 General Misconceptions
Any movement to implement a new transit funding mechanism will certainly be
met with at least some public resistance, especially when the strategy has very
little precedent elsewhere. However, in the case of the parking fee, much
resistance will be based on easily debunked misconceptions. Consequently, it is
important to anticipate the potential sources of opposition and prepare logical,
convincing counterarguments. If the public can come to the realization that the
parking fee is, in fact, the best option, political barriers are less likely to be quite
so formidable.
4.1
Misconception: The Fee Will Have the Greatest Impact on
the Collar Counties
Recent media critiques have expressed the perception that the collar counties
would feel the greatest impact from parking fee scheme. While this seems to be
only a very misleading rumor, it is it is not surprising that the current political
climate has fostered such ideas. Some of this confusion can be traced to:
- The existence of an unrelated parking taxes in Cook County
-
The auto-dependence of the collar counties
4.1.1 Confusion Between Existing Parking Taxes and the Parking Fee
Some of the confusion might arise from the fact that commercial facility parking
taxes are already imposed by both Cook County and the City of Chicago. The
current rates for these taxes are depicted in Tables 4.1.1-1 and 4.1.1-2.
$3.00 and below
$3.01-$4.99
$5.00-$11.99
$12.00 and up
U ji
$0.50
$0.75
$1.00
b.UU and Delow
$15.01-$24.99
$25.00-$59.99
$60.00 and up
U
$2.50
$3.75
$5.00
ObU.UU
ana Delow
U
$10.00
$15.00
$20.00
$60.01-$99.99
$100.00-$239.99
$240.00 and up
Table 4.1.1-1: Cook County parking tax rates (Kirschbaum, 2004)
DY
Rat$
rkng
ax
Ra
$2.00
$2.01-$4.99
$5.00-$11.99
0
$1.00
$1.75
$12.00 and up
$2.25
"Prko
Tex Rate
rking Tax '
t
RMO
0
$10.00 and below
$5.00
$10.01-$24.99
$8.75
$25.00-$59.99
$50.00 and below
$50.01-$99.99
$100.00-$239.99
0
$20.00
$35.00
$11.25
$240.00 and up
$45.00
WeSOY
Rae
$60.00 and up
.
Table 4.1.1-2: City of Chicago parking tax rates (Kirschbaum, 2004)
Regional Parking Fee
69
It could be argued that enough public burden is already carried by downtown
facilities that must pay this tax. For instance, a downtown facility that charges a
daily space rate of $20 would be responsible for a county tax of $1 and a city tax
of $2.25 for each daily fee collected. Assume that the facility consists of 300
spaces, has a daily occupancy rate of 75%, and has annual per space pre-tax
operating costs of $750. Given this relatively typical structure, the annual parking
taxes more than double the facility costs (54% of total costs are attributable to
the tax, as depicted in Figure 4.1.1). Even if occupancy rates drop to 65% (thus
reducing the amount of tax paid on parking space income), the combined parking
taxes still account for approximately 50% of the total facility costs.
CBD Commercial Parking Facility
Annual Cost Split
Existing
Overall
Operations &
Maintenance
Costs
Parking Taxes
52%
(Both County
& City)
54%
Figure 4.1.1: Existing parking taxes as percentage of total facility costs for
the average commercial parking facility
The existing parking tax is indeed significant. Thus, it would be logical to assume
that urban interests would only support a new finance policy in which the majority
of costs are bourn by the suburbs. However, there are a number of differences
between the Cook County/City of Chicago parking taxes and the parking fee that
make this an inaccurate assumption:
Common Misperceptions
Cook County/City of
ChicagoRT
RTA
Services financed by
City & county general
funds, many of which
are not transportation-
RTA transit operations,
which are entirely
transportation related
related
Only commercial (forprofit) parking facilities
All non-residential parking
facilities within the region,
including those owned by
tax exempt entities
ad valorem on facility
Flat fee on number of
revenues
spaces
Table 4.1.1-3: Qualitative comparison between existing parking taxes and
potential parking fee
Of particular significance is the difference between impacted groups. While the
existing parking tax only impacts commercial lots, the proposed fee would be
applied to all non-residential lots. The facilities that currently pay the revenuebased City and Cook County taxes represent a very small segment of this group.
Since the annual parking fee revenues and rates for Cook County are known, we
can estimate the number of spaces currently subject to the commercial parking
tax. Cook County collected approximately $33.6 million in parking tax revenues
during the 2003 fiscal year (Cook County, 2004). It can be assumed that the
shares of total parking spaces for each of the three categories are equal (33% for
each). Additionally, it can be conservatively estimated that the average parking
rates are:
Daily = $5.00-$11.99 (tax rate of $1.00)
Weekly = $15-$24.99 (tax rate of $2.50)
Monthly = $60-$99.99 (tax rate of $10.00)
Regional Parking Fee
Daily Parking
Share of
Annual
Commercial
Parking
Revenue
Annual
Revenue
Revenue
per Given
Period
Spaces
Weekly Parking
33%
33%
$11,088,000
$11,088,000
Monthly Parking
33%
$11,088,000
52
Total
Spaces
Table 4.1.1-4: Estimate of Cook County commercial parking space supply.
based on 2003 revenues of $33.6 million and equal category share.
Although it is an unrealistic scenario, a higher supply estimate can be achieved
by assuming that all revenues are generated by monthly spaces.
Daily Parking
Share of
Annual
Commercial
Parking
Revenue
Annual
Revenue
Revenue
per Given
Period
Spaces
0%
Weekly Parking
0%
Monthly Parking
100%
$33,600,000
52
Total
Spaces
Table 4.1.1-5: Upper bound estimate of Cook County commercial parking
space supply, based on 2003 revenues of $33.6 million and monthly
parking dominance
Even with this higher parking space supply estimate, only about 6%36 of regional
parking spaces are subject to the existing parking taxes. As will be demonstrated
in the next section, 280,000 is also a very small share of the total number of nonresidential spaces in Cook County. The vast majority of facilities in the urban and
inner suburban areas currently do not face any extra charges.
Determined by dividing 280,000 commercial spaces by the 4 million estimated
regional non-residential spaces.
36
Common Misperceptions
The fact that a very small proportion of City and Cook County facilities already
pay a tax to another governmental entity for entirely different purposes is clearly
not a reason to expect an RTA parking fee would ever be imposed exclusively on
the suburbs. In fact, there would be no logical explanation for a parking fee that is
concentrated in only one area, since all parking spaces throughout the region
(urban, inner suburbs, and outer suburbs) impose some sort of cost on the larger
transportation system, an issue that will be explored in greater depth throughout
this thesis. In order to raise revenues that will support regional mobility, it only
natural that the source will be on a regional scale.
4.1.2 County-Level Impacts of Parking Fee
Although the per-space fee will be applied uniformly across the region,
opponents will almost certain insist that the outer suburban counties are still the
primary targets of the policy. After all, the auto dependency of the collar counties
could easily lead one to assume that they have the largest regional share of
parking spaces. However, this belief is also unsupported by fact. Area-wide
parking supply estimates indicate that Cook County has the largest share of both
workplace and retail parking spaces and even when Chicago is excluded from
the total, suburban Cook is approximately equal to the collar counties.
Share of Regional Workplace
Parking Supply
Kane
.
Chicago
25%
50/
5DuPage
16%
Will
5%
SMcHenry
3%
Lake
9%0/
Cook
(Chicago
excluded)
37%
Figure 4.1.2: Approximate share of regional workplace parking supply by
county (US Census, 2000)
Regional Parking Fee
Share of Regional Retail
Parking Suppy
Chicago
7%
Will
90/
Cook
County
(excl.
Chicago)
k
33%
DuPage
22%
8L/k
Kane
McHenry 10%
110/0
Figure 4.1.3: Approximate share of regional retail parking supply by county.
(CB Richard Ellis, 2005) 3
37 Parking multiplier for outer counties (Will, DuPage, Lake, McHenry, and Kane)
was 10 spaces per 1,000 square feet. Parking multipliers (per 1,000 sq feet)
were 7 spaces and 5 spaces for Cook County and Chicago, respectively. Even
with these lower multipliers, Cook County still accounts for the largest share of
retail parking supply,
Common Misperceptions
Approximate Contribution Share of Total
Parking Fee Revenues
Chicago
21%
Cook
(excl.
hcago
Will
6%
DuPage
Kane
18%
6%
Lake
McHenry
90/a
5%
Figure 4.1.4: Approximate share of total parking fee revenues by county.
Combination of Figures 4.1.2 & 4.1.3. (US Census, 2000 and CB Richard
Ellis, 2005)
Recall from section 4.1.1 that the estimated upper bound of Cook County's
commercial parking supply is 280,000. Obviously, this is a very small percentage
of Chicago area parking supply (6% of an estimated 4 million spaces). Now we
see that it is also a relatively small percentage of Cook County parking supply.
Since the combined Cook County and City of Chicago share of regional parking
supply is 46%, it can be estimated that Cook County's total supply is
approximately 1.84 million. Consequently, the number of commercial spaces
currently subject to the City/County parking taxes is only 15% of Cook County's
total parking supply. This further reinforces the idea that the existing City/County
parking taxes should not be confused with the proposed RTA parking fee.
Regional Parking Fee
75
4.1.3 Comparison with Sales Tax
From the perspective of the collar counties, the parking fee option should be
much more attractive than any of the proposed sales tax increases. While the
sales tax increase would be applied exclusively to the collar counties (raising the
.25% to either .5%, .75%, or 1%), the parking fee would be distributed across the
entire region.
As indicated in Chapter 3, an increase in the collar county sales tax from 0.25%
to 0.50% would result in additional annual revenue of approximately
$128,746,000. The City of Chicago and suburban Cook County would make no
contribution to this amount. However, if a similar amount were to be raised using
a parking fee, a significant proportion would come from Cook County. Given this
estimated contribution share, the dollar amounts required from each county to
produce the same annual revenue stream as a 0.25% increase in collar county
sales tax ($128,746,000) is:
Gpkx-imw
$45,496,120
$8,099,954
A#04mwy$6,240,604
$11,880,194
$22,728,460
$7,624,299
$26,676,368
Table 4.1.3-1: County parking fee contributions needed to generate annual
total revenues of $128,746,000
Given these conditions, the aggregate collar county parking fee contribution
would be only 44% of the potential aggregate contribution under the proposed
0.25% increase in collar county sales tax.
Common Misperceptions
76
Contribution to 0.25% Increase in
Sales Tax Revenue
Cook
Chicago
0%
00
Collar
100%
Figure 4.1.5: Contributions to 0.25% increase in collar county sales tax
Contribution to
Parking Fee
Chicago
21%
Collar
44%
Cook
35%
Figure 4.1.6: Contributions to parking fee revenue
Regional Parking Fee
4.2 Misconception: The Fee Will Force Economic Activity to
Locate Elsewhere
One of the main criticisms of a parking charge is that it could force business
investment away from the implementation area. Theoretically, a parking fee
could cause operating expenses to increase to the point at which the current
location is no longer cost-effective. There is some evidence that differentials in
certain types of expenses, such as property taxes, may affect location decisionmaking. 8 However, this is only a realistic outcome if (1) the added parking fee
cost is of a sufficiently large magnitude for business investors to consider major
facility relocation and (2) there are feasible alternative locations for the business
activity.
Actual data on this phenomenon is difficult to obtain. Parking fees have been
implemented in the Central Business Districts of both Perth and Sydney,
Australia. However, most information regarding business location is largely
anecdotal. For instance, reports indicate (2001 WPS paper), that "several large
developments" have been constructed or will be constructed in downtown Perth
since tax implementation. Formal comparisons have not been made between
pre- and post-levy levels of development. Furthermore, the relatively short
implementation period (only since 1999) means that data on long-run effects are
still largely unavailable. As for Sydney, a city that has had a parking fee for a
slightly longer period of time (since 1992) and that imposes a much higher perspace rate it seems as though there has been no academic analysis of policy
impacts. In fact, local transportation scholars seem to be relatively unconcerned
about the tax.
4.2.1 Potential Counter-forces
If the two Australian policies did, in fact, have very little impact on business
location decisions, it is likely due to two potential forces: 39
Central Advantage Specific to Current Location: There are two major theories
of spatial location: the spatial competition model (in which all nodes within a
given region are assumed to be in competition with one another - this is a model
that is often used by business interests) and the monocentric model (in which
there is a clearly defined central place that tends to naturally be the most
desirable location in a given region). The impact of the parking fee will be less if
the area of implementation is more accurately approximated by the monocentric
model. In such a case, the benefits of central location are much higher than the
For instance, Dye, et al examined the impact of the unique Cook County
property tax structure on business location. While property taxes in the collar
counties are assessed at a uniform rate for both residential and commercial
properties, there are different rates in Cook County (with commercial being the
higher of the two).
38
Common Misperceptions
potential cost-reduction benefits of relocation. It is likely that the location patterns
of many major US metropolitan areas are most accurately approximated by a
hybrid spatial competition/monocentric model. (Rufolo & Bianco, 1998)
Increased Location Value due to Transportation Improvements (Specifically
Transit): In the case of Perth, the parking tax revenues were used to directly
finance transit improvements. Specifically, the new cash flow enabled the city to
offer free transit service throughout the city's central area. Such a perceptible
improvement in the quality of downtown transportation was likely to have had an
impact on its relative attractiveness as a business hub. In the long run, it is
possible that such visible enhancements in accessibility could actually inspire
even more businesses to re-locate to sites within the implementation area.
Within the US context, there is evidence that transit proximity does enhance the
value of commercial properties. For instance, in a study of properties in
California's Santa Clara County, Cervero & Duncan (2001) found that:
-
Commercial properties within walking distance of a light rail station had
average values 23% higher than comparable properties that lacked transit
accessibility
Properties within business districts and within a quarter mile of commuter
rail stations (CalTrain) had average values 120% higher than comparable
properties that lacked transit accessibility
Of course, in order for businesses to place such a high value on transit
accessibility, the benefits of enhanced transit must be highly visible.
4.2.2 Guaranteed Counter-force: The Case for a Minimal, Regional Fee
While both the inherent advantage of certain locations and the potential
transportation enhancements can be major factors in location decisions, it is not
guaranteed that they will be enough to prevent business movement. In some
situations, the locational advantage and infrastructure improvements may not be
valued highly enough to impact behavior.
There is one additional factor that can be much more effective at limiting negative
impacts on business location: geographic scale. As long as the fee is applied on
a limited geographic scale, such as isolated to the CBD, the cost of moving just
beyond the implementation boundaries remains relatively low. However, with a
parking fee is applied on a large regional scale, the business activity must move
a significant distance in order to achieve any sort of added benefit. The added
parking fee costs would have to be quite substantial for a business to consider it
worth moving so far away from existing customers, suppliers, and employees. In
For instance, Schaumburg is the municipality with the second largest number of
employees in the region (after Chicago). A Schaumburg based business that
Regional Parking Fee
owns its own property40 would have to move at least 25 miles (beyond the
Kane/DeKalb border) in order to avoid the parking fee. Firms that are trying to
decide where to locate within the Chicago region will face the same parking fee
costs regardless of whether they locate in McHenry, Lake, Cook, Kane, DuPage,
or Will counties.
Figure 4.2.1: Location of Schaumburg, the region's second largest
employment center. The city is at least 25 miles within the boundary of the
parking fee implementation area. Business movement across such a large
distance is unlikely.
As will be discussed in greater detail in Chapter 5, businesses that lease space
may never even see the expenses associated with a parking fee.
40
Common Misperceptions
80
Additionally, by spreading the burden over a larger geographic area, it is more
likely that a sufficient level of revenue can be achieved with a relatively minimal
per-space fee. For instance, given the estimated regional base of 4 million
spaces, it is easy to meet transit budgetary needs with a monthly per-space fee
in the range of $3-$9. However, if the fee is only applied to spaces within the City
of Chicago, higher rates would be necessary to achieve similar budget goals.
Assuming that the number of eligible spaces in the City of Chicago is
approximately 1 million, the following range would be required to achieve similar
revenues to the regional predictions:
Table 4.2.2-1: Range of monthly per-space rates required if fee is applied
on a more limited citywide scale
Table 4.2.2-2: Range of monthly per-space rates required if fee is applied
on regional scale
Lower per-space rates means that the cost of the parking fee could be negligible
for most businesses.41 This further decreases the likelihood that the fee will
influence location decisions.
41
The rent-related implications of this will be explored in greater depth in Chapter
5.
Regional Parking Fee
4.3 Misconception: Roadway Improvement Is Better Regional
Use of Funds
Some critics will surely contend that the region could be better served if the
parking fee revenues were used primarily to enhance the regional roadway
network. It is commonly believed that the most effective way to reduce
automobile congestion is through the expansion of automobile infrastructure.
Increased capacity is already a focus of roadway initiatives throughout the
region. The following major roadway expansion projects will be implemented over
the next several years:
-
The Illinois State Toll Highway Authority plans to widen 117 miles of
roadway including portions of the Tri-State Tollway (1-80/1-94/1-294), the
Northwest Tollway (1-90), and the Ronald Reagan Memorial Tollway (1-88)
-
The Illinois Department of Transportation plans to widen portions of both
the Dan Ryan Expressway (1-90/1-94) and the Kingery Expressway (1-80/194)
Clearly, there is a need for greater transportation capacity. However, it is not
realistic to believe that roadway expansion projects, most of which are limited in
scale and take years to complete, can actually keep pace with travel demand.
The track record for the region is certainly not encouraging. In fact, the ratio of
available lane miles to vehicle miles traveled declined approximately 26% during
the period 1982 to 2002.
Common Misperceptions
82
M
Available Lane Miles per 1,000 VMT
Chicagoland, 1982-2002
0.13
0.12 0.11
-e-Lane Miles per
000 VMT
01
0.09
0.08
0.07
Year
Figure 4.3.1: A comparison of the Chicago region's available lane miles
and annual levels of Vehicle Miles Traveled (VMT). (TTI)
Regional Parking Fee
Annual Increase
Comparison
9.00%
8.00%4
7.00%
E Percent increase in
6.00%
VMT
5.00%
4.00%
N Percent increase in
lane miles
2.00%
1.00%
0.00%/
Year
Figure 4.3.2: A comparison of annual roadway infrastructure expansion
rates and annual increases in Vehicle Miles Traveled (VMT) within the
Chicago region. (TTI)
TTI estimated that, just to maintain current levels of congestion, an additional 114
lane-miles are needed annually. Obviously, the regional goal of congestion
reduction would require construction on an even grander scale. Even if the region
could consistently generate 200+ lane-miles of additional roadway every year,
the use of parking fee funds for roadway expansion would still be a flawed
proposition for the following reasons:
4.3.1 Reinforces Silo Mentality
Some suburban road advocates are likely to argue that, if parking spaces in the
suburbs are charged, then the proceeds should be used for infrastructure that
directly enhances automobile travel. After all, for 26 years, proceeds from the
federal gasoline tax were reserved exclusively for roadway projects. However,
the belief that parking dollars should naturally support roadway expenses does
not recognize the fact that auto and transit facilities are both components of a
larger transportation network. Additionally, it reinforces the idea that suburban
and urban interests are inherently at odds. While roadway improvements are
certainly part of the regional transportation picture, exclusive investment in road
facilities is not the most effective way to improve the overall health of the regional
transportation network.
4.3.2 Long-run Implications of Roadway Expansions
Contrary to popular belief, roadway capacity enhancements do not actually result
in long run reductions in regional congestion. A Surface Transportation Policy
Project (STPP) study of historic data for 70 US municipalities found that there
Common Misperceptions
was no connection between high roadway expansion investment and reductions
in congestion levels. (STPP, 1998)
While roadway expansions may cause temporary alleviation of congestion, the
effect of generated traffic will eventually result in higher traffic levels. When
improvements on a particular roadway link, generally through capacity
expansion, reduce congestion-related costs, additional trips are generated. Some
are trips that may have already been occurring at other times or on other
roadway links. However, the improvements also can induce a number of new
trips. For instance, a transit rider may realize that the road improvements make
driving preferable, so a mode shift occurs. Or, a driver that may have otherwise
foregone certain unnecessary trips because of high roadway congestion may
decide that the trip is suddenly worthwhile. In the long run, the specific roadway
improvement may change land-use in the area, perhaps through the creation of
more dispersed destinations, thus generating more traffic for adjacent links.
When taken together, the different types of generated traffic can all but eliminate
the original benefits of roadway expansion. Before planning major roadway
capacity projects, there must be a consideration of these secondary effects,
which are very difficult to reverse. (Litman, 2004)
While it seems as though the negative impacts of capacity expansion are limited
to the roadway network and automobile users, there are additional negative
implications for transit. One of the major transit-related implications of this
phenomenon can be illustrated with the following graph:
Costauto
B
..........
.....................
Vol
Figure
Regional
as
Congestion
4.3.3:
Parking
Mode
Transit
Reqional
Fee
Policy
Share
Driver
auto
Increases
(adapted
from
Jara-Diaz,
2003)
The perceived costs for transit (depicted along the left-hand y axis) and
perceived costs for auto (depicted along the right-hand y axis) incorporate the
perceived out-of-pocket monetary costs as well as less easily quantifiable costs
of inconvenience, time, and physical comfort. It shows that, for most people that
opt to use cars, the initial perceived costs of auto starts out significantly lower
than transit. This does not mean that the absolute monetary cost of transit is
actually higher than that of automobile travel, it just implies that many individuals
generally perceive the combination of quantitative and qualitative costs in that
manner.
As congestion grows (due to higher volumes of auto traffic) there are gradual
increases in perceived auto transport costs. These increases continue until the
perceived cost level reaches the point where there is indifference between transit
and auto (Point A). Theoretically, it is at this point when transit starts to seem like
a feasible option to many of those that traditionally have traveled by automobile.
However, before that extreme point is reached, there is historically a tendency to
counter the costs of congestion with public investments in roadway capacity.
These increases in roadway supply lowers user perceived costs in the short run
(movement from point A to point B on the graph).
Of course, the condition at point B does not last for very long. The lower costs of
automobile travel will attract even more drivers and gradually the volume of traffic
increases to a level greater than it was previously. At the same time, the number
of transit users has decreased (some have shift to auto), thus making the cost
larger for remaining transit riders (less convenient service, potential increases in
fares just to keep service going, etc.)
The new equilibrium volume levels (Point C) occur at a moment when both auto
and transit costs are significantly higher than they were before the roadway
capacity expansion. Ultimately, everyone is made worse off by the roadway
investment.
However, if the investment is directed toward transit, there is a reduction in costs
for all. There are reductions in costs for transit users (better service, stable fares,
etc) and reductions in existing congestion would also make those that remain on
the roadway better off. Thanks to the effect of induced travel demand, roadway
investment is a one-way ticket to making everyone worse off, whereas transit
investment really can benefit everyone throughout the transportation network.
4.3.3 Additional Negative Impacts of Roadway Construction
It is unlikely that widespread highway construction has been the only factor in the
creation of sprawling, transit-incompatible development patterns. As discussed
earlier (Chapter 3), certain government land-use regulations also played a role.
However, with unconstrained, poorly coordinated expansion of the roadway
Common Misperceptions
network, land uses in the region become even more difficult to connect with
transit.
This is not meant to suggest that the region should shift to an exclusive focus on
transit investment. The region's highway network does serve an important
purpose and maintenance should remain on a high level. Roadway operational
innovations such as freeway ramp metering, traffic signal coordination, incident
management, and high occupancy vehicle (HOV) lanes all have a role in the
larger transportation network. However, balanced support of both transit and
roadway infrastructure must be a much greater priority than it has been.
Complementing this balance would be an increased focus on general mobility
initiatives such as enhanced streetscaping, bike lanes, and park and ride
facilities.
4.4 Misconception: Parking Fee is Primarily a Travel Demand
Management Tool
4.4.1 Pricing Can Have An Impact
Much of the parking-related research has tended to focus on potential travel
demand response to different parking situations. For instance, Hensher & King
(2001) use a stated preference analysis to determine the sensitivity of driver
42
choice to parking curfews & prices in the Sydney Central Business District.
Their work shows that increasing the price of parking, if politically feasible, can
have a significant impact on travel mode choice. A number of other studies have
also found that assigning significant prices to parking or introducing employer
cash out schemes can alter driver behavior. (Higgins, 1992)
However, none of these studies are particularly relevant in the case that drivers
do not actually perceive the parking fee or in the case that the fee is too low to
make drivers consider other options. While it may seem similar to congestion
charging schemes such as the one introduced in London during 2003, there is
one very major difference: drivers may never actually perceive an increase in
driving costs. While congestion charges are applied directly to the driver, a fee on
parking spaces would be applied to the parking facility owner. There is no
guarantee that facility owners will actually pass the costs along to drivers. In fact,
So, while cities
in most cases, the costs will not be passed along to drivers.
considering a parking tax may be tempted to use traffic demand management as
one of the major justification, a parking tax alone is not a reliable tool for this
purpose. The lack of impact on driver cost supports the belief that a parking fee
can be politically feasible.
Unfortunately, there was no actual discussion of the parking levy that has been
imposed on downtown Sydney. All price figures were hypothetical.
43 Property-owner response to the proposed parking fee level will be examined in
greater detail in Chapter 5.
42
Regional Parking Fee
87
Parking Tax Impacts
p~ts63a
a
tdies usae Rteo
Some car users may
swtch to tranit
Too" U
ott,.r possiLbe
car User esponses
equals-
{+ wave use;
p
---
ehan
Pamafg Tax fatenus""""""
Inceased Trnst usemay resut i...
Te
uM S
nuny Po46e
benefia for e0y
0n
W Quafty of Lao]
Figure 4.4.1: Parking Tax Impacts Flowchart (InterVISTAS Consulting, Inc.
for Vancouver TransLink)
4.4.2 Options, Not Penalties
As Donald Shoup (2005) explains, a parking tax must be combined with other
strategies to truly achieve broader transportation goals. Congestion reduction will
not magically occur because higher parking rates have been implemented. If
there are few realistic options, travel behavior will not change. Complementary
policies, such as expanded transit services and parking cash-out programs, must
also be implemented in order to achieve any major results.
While fees can have an impact on driver behavior, it has been suggested that
incentives could be much more effective at altering driving habits. Baldassare, et
al, (1998) found that respondents to the 1992 Orange County Survey were much
more likely to change commuting behavior if presented with employer cash-out,
improved transit, or carpool options than they were when faced with parking,
smog, or congestion fees.
Common Misperceptions
88
There is often the perception that the implementation of a parking fee will be a
travel demand management panacea that will result in significant conversion of
auto trips to transit trips. Both Perth and Vancouver have cited this expected
benefit in their educational literature. See Figure 4.4.1: for Vancouver's picture of
potential effects. After all, if people must pay more to park, then alternative
options are likely to look better. However, this is not necessarily the case. First, in
order for drivers to perceive increased driving cost, they must actually be
charged the additional amount. In some cases, the fee may certainly be passed
along to the user. However, in most cases, the facility owner is conducting his
own internal cost/benefit calculations. We need to examine the fee impact from
this perspective in order to get the whole story.
A widely celebrated example of travel demand management is the London
congestion charge, implemented in early 2003. By imposing a E5 daily charge on
any vehicle entering the boundaries of downtown London, local officials hoped to
reduce traffic levels in the highly congested city. By all accounts, the congestion
charging scheme was a stunning success, resulting in current levels of
congestion that are 30% less than pre-charge levels. However, it must be
remembered that London was, and remains, a city with ample alternative
transport options. Prior to the implementation of the travel demand management
policy, only about 10% of peak period trips to the downtown were automobilebased (Litman, 2004) When faced with the new charge, travelers faced a built-in
set of transport mode choices. Additionally, London substantially increases bus
capacity and frequency at the same time it imposes the congestion fee.
Consequently, the long-term success of the program depends on continued
maintenance of high transit service levels and the implementation of any
expansions needed to keep pace with increases in new ridership. A city hoping to
follow in London's footsteps, either with congestion pricing or another demand
management strategy, must first make sure that transit capacity is sufficient from
the outset. If there are any doubts in regards to the long-run sustainability of
network service levels, then those issues must be addressed in full.
Ultimately, any serious endorsements of the Chicago parking fee should not cite
traffic reduction as one of the primary, direct goals. This is first and foremost a
revenue generating policy designed to prevent serious shortfalls in transit
operations funding levels. Under the CTA's crisis budget scenario, many people
throughout the region will face new limitations in travel mode choice. Once
transit network is ensured a stable and healthy future, policy-makers can begin to
focus their sights on other goals. One advantage of the parking fee versus other
funding sources is that it can be adjusted upward as transit needs demand. So,
in addition to avoiding the pending budget crisis, the fee can enable the RTA to
actually improve public transportation over time. In turn, the long-run transit
improvements can help the region mitigate congestion and encourage smart
growth land-use. So, in lieu of resorting to demand restraint, regional goals can
be achieved through supply restructuring and public transport expansions.
Regional Parking Fee
4.5
Chapter Summary
In order to build more broad-based support, it will be important to clarify several
common misperceptions about the parking fee. First, the parking fee will not be
imposed exclusively on the collar counties nor will it have the largest impact on
these outer suburbs. Second, there is no reason to expect the fee to cause
business activity to relocate out of a desire to avoid the fee. In fact, the regional
transportation improvements that will result from the fee could draw business
activity, particularly to areas of high transit accessibility. Third, investment in
roadway expansion is not a feasible alternative use of parking fee revenues. If
regional mobility goals are to be met, the funding should be used for transit or
other alternative forms of transportation. Forth, the parking fee should not be
viewed as a means to constrain travel demand. The fee will be too modest to
impact behavior and is most useful as a generator of revenue for transit. If the
parking fee ultimately results in altered regional land-use and travel patterns, it
will be because it enables a greater variety of alternative transportation choices.
Common Misperceptions
5 Incidence & Magnitude
The previous chapter focused on basic misconceptions that would be most likely
held by the general public. Overcoming erroneous perceptions can foster greater
levels of policy acceptance throughout the region. It is reasonable to expect that
the parking fee:
-
Will not place a larger burden on the collar counties
Will not cause business activity to locate elsewhere
Will support the long term mobility of the region
Will not directly impact the cost of automobile usage
While clarification of each of these issues is a relatively simple matter,
understanding of fee incidence and magnitude requires a more detailed analysis.
Even if the general public is largely supportive of this initiative, most commercial
property owners will still perceive it as a major threat. This is completely
understandable considering the fact that the parking fee will represent a new
property-level expense. Property owners can be expected to claim that the
parking fee has a major adverse impact on real estate.
5.1
Theoretical Approach
5.1.1 Can the Owner Successfully Pass the Cost Along?
Theoretically, a property owner faced with a new expense will consider the option
of passing the fee along through rent. However, this is not a straightforward
decision. The owner is aware that increased rents will likely result in a negative
demand-side response. The degree to which tenant demand declines will be
dependent upon the prevailing market elasticities, which are always difficult to
know precisely.
Demand Elasticity: While tenants can be fairly mobile, it is expected that
demand is not entirely elastic. This is especially true in the case of a fee that is
applied uniformly across the region. In order to avoid the higher rent, the tenant
may have to move quite a distance, which is likely to alter proximity to existing
customers, suppliers, and competitors. (McDonald, 1996)
Supply Elasticity: For the purpose of this analysis it is assumed that, in the
short term, property supply is very inelastic with regard to price. This is due to the
inherent "stickiness" of real estate supply. Neither construction nor demolition are
quick processes. However, there is some elasticity of supply in the long-run,
mostly in terms of supply increases. After all, an increase in market prices can
Regional Parking Fee
easily spark a construction boom, but even sharp declines in market prices are
unlikely to result in widespread demolition of existing space.44
Price
Supply
...
..
..
..
.............. ........
Demand
Q1
Quantity
Figure 5.1.1 Original property market equilibrium with inelastic short-run
supply curve.
44 It is assumed that supply elasticities are of a similar magnitude for all property
sector types (retail, office, and industrial). It was originally thought that there are
significant differentials between supply elasticities for different types of tenants.
For instance, under traditional land use patterns, downtown retail supply was the
most inelastic (difficult to construct more in the most desirable shopping areas),
office space was perceived as slightly more elastic (if more space is needed,
there is the possibility of constructing taller office buildings), and industrial supply
was the most elastic (industrial tenants can be generally more flexible about
location, so new facilities can be constructed in a wide variety of non-central
places). However, changes in land-use patterns over the past few decades have
blurred the line between the locational needs of different types of tenants. For
instance, premium retail is now just as likely to be located in a suburban
shopping mall as in the dense urban core. In general, it is likely that differentials
between supply elasticities are not as defined as previously believed. (Jones &
Orr, 1999).
Incidence & Magnitude
Price
P2
1
P1
Demand
Q2
Q1
Quantity
Figure 5.1.2: Demand shift in response to increased price. New quantity
demanded is indicated by Q2.
If the property owner does decide to pass the added cost along through higher
rents, the new cost of rentable space is increased from P1 to P2. In response,
the market demand for space shifts from Q1 to Q2. However, the short-term
inelasticity of supply prevents the property owners from adjusting to the new
demand quantity. As a result, there is a mismatch in the market between supply
and demand, with more high-priced property available than the market requires.
Since this makes vacancy more likely, the total rental income is reduced, thus
impacting the property owner's operating structure and causing declines in
property value. In order to recapture the previous level of demand, individual
property owners would be tempted to absorb the cost of the fee, thus reducing
the rent to previous levels (P1). However, a return to pre-parking fee rent levels
would also impact the owner's operating cost structure and, ultimately, the
property value. In considering how these changes in income or expenses can
impact the property's value, it is useful to know that property level equilibrium can
be described with the following equation:
(Total Rental Income 45 - Total Operating Expenses 46 ) / Property Value
=
Net Operating Income / Property Value =
Cap Rate
The original total rental income is determined by the original rental level, as
depicted by P1 in the graphs.
46 Total operating expenses is a combination of property Operations
&Maintenance costs plus any extra expenses, such as the parking fee.
45
Regional Parking Fee
93
Since the cap rate for the specific property is exogenously determined by the
aggregate capital market, it should be treated as a constant, requiring
readjustments elsewhere equation to regain market equilibrium. So, regardless of
whether rental incomes decrease or operating expenses increase, maintenance
of market equilibrium requires a reduction in property value. For example,
absorption of the parking fee by the property owner should be interpreted as an
increase in total operating expenses, which will then force declines in the
property value. If this occurs on an aggregate level, market-wide declines in
property value will gradually force changes in the total real estate supply. As
depicted in Figure 5.1.3, there will eventually be a new equilibrium supply that
was lower than the original level. Properties that were most costly to operate
(including those impacted most severely by the parking fee and older buildings
that were of marginal value in the first place) will no longer be in the supply pool.
A new equilibrium is achieved where supply quantity equals Q3.
Price
Supply
P2 ..........
......-..-...----.
P3 .-. ---.......
P1.-
.....
Parking Fee
......
Parking Fee - -
Demand
Q2 Q3 Q1
Quantity
Figure 5.1.3: New property market equilibrium indicated by P3 & Q3
While the individual property owner is still absorbing the parking fee, the overall
property operating cost structure has shifted. Both non-tax operating expenses
and property values are at different levels (lower and higher, respectively) than
they were in the original equilibrium. So, although Q3 is lower than Q1, it is still
high enough to re-achieve balance with the market cap rate.
5.1.2 What are the Long-Run Market Effects?
Even though the commercial property stock is very inelastic in the short-term, it
can very gradually change in response to market demand. This means that, in
the long run, market supply is not completely inelastic. More accurately, the longrun supply function is likely to be kinked, representing the concept that supply
increases are more likely to occur than supply decreases.
Incidence & Magnitude
111111
The average degree of elasticity can affect the market-wide levels of equilibrium
price and quantity. For instance, if the long-run property supply is still relatively
inelastic, the market-wide equilibrium could be depicted by Figure 5.1.4:
Price
-
With Parking Fee
-
Without Parking Fee
Supply
(Long-run)
P2
P3
P1
'arkinq Fee
Demand
Q2 Q3 Q1
Quantity
Figure 5.1.4: Real estate market equilibrium when long-run supply is
relatively inelastic
In the inelastic case, the difference between the pre-fee equilibrium and the postfee long-run equilibrium is not particularly large. The low market-wide inelasticity
of supply means that the typical property-level equilibrium will not be drastically
different from the one that existed prior to parking fee implementation.
Specifically, the new equilibrium values of price and quantity, indicated by P3 and
Q3 in Figure 5.1.4 are relatively close to the original values, as indicated by P1
and Q1.
Regional Parking Fee
95
With Parking Fee
.
Price
-
Without Parking Fee
Supply
(Long-run)
P2
P1
Parking Fee
..
Demand
Q2 Q3
Q1
Quantity
Figure 5.1.5: Real estate market equilibrium when long-run supply is
relatively elastic
On the other hand, the both the tenant and property owner's situation can be
different if the market-wide supply elasticities are relatively high. This scenario is
illustrated by figure 5.1.5. In this case, there is a larger difference between the
original pre-fee equilibrium and the post-fee long-run equilibrium. In other words,
there is a greater difference between P1 and P3, which means that overall rents
will be higher than in the inelastic case. Given these market conditions, the
tenant will experience a larger impact from the parking fee than in the inelastic
supply case.
5.2 The Magnitude of Additional Cost
The analysis above examines the theoretical effects expected from the
implementation of a parking fee. Let's take a moment to review the process:
The parking fee is implemented and property owners perceive an increase in
total operating expenses. In the short-run, the property owner may be successful
in passing the full parking fee expense along to tenants. However, if the rent
increases are large enough, the owner will face noticeably lower levels of tenant
demand, which could have a significant impact on real estate profits. If this
impact is of a sufficient magnitude, the owner could be convinced that at least
partial absorption of the fee would be a better choice. Owner and tenant continue
to respond to market cues as prevailing levels of price and quantity gradually
approach a general equilibrium. The long-run equilibrium levels of price and
quantity will ultimately depend on the relative elasticities of property demand and
supply.
Incidence & Magnitude
96
If viewed in this light, the impact of the parking fee depends on how various
stakeholders perceive its magnitude. Although the theoretical market response
can be illustrated clearly, actual changes in equilibrium levels may be much less
perceptible in practice. If the magnitude of the parking fee is low relative to other
potential expenses, market response may be minimal.
While specific property level data is relatively difficult to obtain, it is possible to
estimate values for general types of properties. The following analyses have
been made based on a review of current property listings and general rental rate
data for the region. As will be demonstrated, it is ultimately not so crucial to have
very exact number for each of the property level sub-components (gross
revenue, leasable floor area, operating costs, etc.). Rather, it is the order of
magnitude that truly matters when trying to determine the relative impacts.
This analysis starts with an urban commercial parking facility case and gradually
moves outward to the realm of suburban office buildings and "big box" retail
properties. For each separate case, total cost structures are determined, both
with and without the proposed parking fee. We then see how different parking fee
levels affect the overall costs, the net operating income, and potential rental rates
(in case the property owner decides to pass the fee along to leaseholders
through rent increases).
5.2.1 Urban Core Facilities: For-Profit Providers
According to a 1997 City of Chicago survey, there were 96,189 publicly
accessible parking lots in the central Chicago area. This included the Loop, the
Lakefront, the South Loop, the Near West Side, Streeterville, River North, and
Upper Near North areas. More recent estimates have rounded that figure up to
100,000 to account for new construction in the area.
Both Cook County and the City of Chicago each impose separate ad valorem
taxes on parking facilities of this type. The structure of each tax is depicted
below:
$3.00 and below
$3.01-$4.99
$5.00-$11.99
$12.00 and up
0
$0.50
$0.75
$1.00
$15.00 and below
$15.01-$24.99
$25.00-$59.99
$60.00 and up
0
$2.50
$3.75
$5.00
$60.00 and below
$60.01-$99.99
$100.00-$239.99
$240.00 and up
0
$10.00
$15.00
$20.00
Table 5.2.1-1: Cook County Parking Tax
Regional Parking Fee
97
$2.00
$2.01-$4.99
$5.00-$11.99
$12.00 and up
0
$0.75
$1.50
$2.00
$10.00 and below
$10.01-$24.99
$25.00-$59.99
$60.00 and up
0
$3.75
$7.50
$10.00
Table 5.2.1-2: City of Chicago Parking Tax
$50.00 and below
$50.01-$99.99
$100.00-$239.99
$240.00 and up
0
$15.00
$30.00
$40.00
47
As indicated in the previous chapter, this type of space will not be exempt, so it
will be important to determine how the proposed policy would impact the existing
cost structure. As opposed to most other (i.e., non-paid) parking facilities in the
region, these facilities already face the fixed costs of fare collection and each has
already established some sort system for separating taxes/fees from revenue. In
fact, since it much less complicated to calculate & report, the proposed flat fee
will be easier for facilities to administer than the existing City & County ad
valorem taxes.48
For the most part, it is assumed that all off-street parking in the CBD, even if it is
not a commercial provider, has limited access in some way, either through an
attendant or gated mechanism. Overall, a facility that did choose to pass the fee
directly along to users would face a relatively minimal cost of implementation.
The Daily Rate
According to the 4th Annual Colliers North American Parking Rate Survey, the
average daily parking rate in Chicago is $22.50 (based on survey conducted
during June 2004), with a low of $15 and a high of $30. The analysis below
assumes a daily rate of $20, slightly below the Colliers average for the garage. It
is reasonable to estimate that the typical annual cost per space for a downtown
The City parking tax rates were raised during this year, resulting in slightly
higher taxes in all categories. While the curious reader can find the new rates
listed in Chapter 3, only the old rates are listed in this chapter. Since the property
level analysis was conducted before these rate increases were known, the old
daily tax of $2 was used instead of the new daily tax of $2.25. This obviously has
an impact on the base cost structure. For instance, the annual parking taxes
under the $2 rate was $243,000 while the annual taxes paid under the new $2.25
rate would be $263,250. However, this will not substantially alter the fundamental
analysis of parking fee impacts.
48 The tiered structure of the existed tax has been criticized by facility operators
for its high level of complexity. Rather than simply report annual revenues, the
operator is required to document each type of transaction (daily, weekly, or
monthly) and received very little technical support from either the County or City.
(Berk & Associates, 2002)
47
Incidence & Magnitude
garage is $750 and for a downtown garage and $500 for a surface lot. (Litman,
January 2004). Assuming that the garage has 300 spaces and has a 75%
occupancy rate, the following estimations can be made:
Actual Revenues
Overall O&M Costs
Existing Parking Taxes
(Both County & City)
Costs Before Parking
Fee
$1,215,000
($225,000)
Proposed Parking fee
Total Costs
Total Annual
Profit/(Loss)
$0
($468,000)
($243,000)
($468,000)
$747,000
Table 5.2.1-3: Urban Commercial Garage Cost Structure without Parking
Fee
Actual Revenues
Overall O&M Costs
Existing Parking Taxes
(Both County & City)
Costs Before Parking
Fee
Proposed Parking fee
Total Costs
Total Annual
Profit/(Loss)
$1,215,000
($225,000)
($243,000)
($468,000)
($10,800)
($478,800)
$736,200
Table 5.2.1-4: Urban Commercial Garage Cost Structure with $3 per Space
Monthly Fee
The implementation of a $3 dollar monthly fee causes annual total costs to
increase by about 2.3% and overall profits decline by approximately 1.4%. If
more aggressive fees are implemented, then the annual impacts are as follows:
Regional Parking Fee
99
Fee Rate
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Annual
Parking fee
$(10,800.00)
$(14,400.00)
$(18,000.00)
$(21,600.00)
$(25,200.00)
$(28,800.00)
$(32,400.00)
New Operating
Expenses
$(478,800.00)
$(482,400.00)
$(486,000.00)
$(489,600.00)
$(493,200.00)
$(496,800.00)
$(500,400.00)
Change
in
Operating
Expenses
2.3%
3.1%
3.8%
4.6%
5.4%
6.2%
6.9%
Change in
Net Net
New
Operating
Operating
Income
Income
-1.4%
$736,200.00
-1.9%
$732,600.00
-2.4%
$729,000.00
-2.9%
$725,400.00
-3.4%
$721,800.00
-3.9%
$718,200.00
-4.3%
$714,600.00
Table 5.2.1-5: Range of Impacts on Urban Commercial Garage (Property
Level)
Since parking is the primary purpose and sole source of revenue for these
properties, they are likely to be more sensitive to parking related policies than
properties for which parking plays a more complementary role. As discussed
earlier, absorption of the costs would mean direct reductions in the value of the
parking facility. A 4.3% reduction in property value could be considered
substantial.
CBD Commercial Parking Facility Total Costs
Proposed Parking
fee
6%
Overall O&M Costs
45%
Existing Parking
Taxes (Both
County & City)
49%
Figure 5.2.1: Cost Breakdown for CBD Commercial Garage, Assuming a $9
monthly parking fee
If the facility owner did decide to pass these increases along to customers, daily
parking rates would just have to be raised from $20 to the following amounts to
achieve the same profit level as before:
Incidence & Magnitude
100
Fee Rate
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00 1
New Daily Percentage
Parking
Increase in Daily
Rate
Parking Rates
$20.18
$20.24
$20.30
$20.36
$20.41
$20.47
$20.53
0.9%
1.2%
1.5%
1.8%
2.1%
2.3%
2.7%1
Table 5.2.1-6: Range of impacts on Urban Commercial Garage (Property
Level)
Operators have generally found that they can pass the full amount of the existing
City & County parking taxes along to customers with little reduction in demand.
(Berk & Associates, 2002)49 It is unlikely that customers that are already paying
very high parking ratesh to access the downtown will readily alter their travel
patterns in response to the minor incremental increases caused by the RTA
parking fee. At most, complete coverage of the additional fee would require an
approximately 2.7% increase in daily parking rates. Since parking is probably a
very small fraction of an individual's total annual budget, this miniscule increase
may not even be perceived.
However, in a more competitive parking market, rathe icess mplme
more
difficult to impose. This might also occur if significant improvements in transit
provided travelers with more attractive transportation alternatives. Further
complicating the ma rk et picture could bthe wfact that facilities in rin parts of
the downtown must compete with the artificially low rates of public facilities.
These include the recently constructed Millennium Park garage, a City-owned
facility with 2,000+ spaces that only recently raised its 24-hour rates to $16.
Ultimately, declines in demand might force private facility owners to absorb at
least a portion of the cost to retain customers. This hypothesis is supported by
work conducted by Kulash in San Francisco during the 1970s implementation of
commercial lot taxes .51 At this time, there was a major increase in parking taxes
so According to Colliers, downtown Chicago had the fifth highest parking rates in
the nation, behind Midtown New York City, Downtown New York City, Boston,
and San Francisco.
51 In the Kulash analysis of this case, it was automatically assumed that the
entire 25% increase would be passed along in the parking rate. This was largely
because this was the required response of the municipal lots and the city/county
actually owned about Y2 of the downtown garages. Additionally, most of the most
detailed data was supplied by the municipal lots, since this was much easier to
obtain than data for private lots. However, the limited data gathered from private
facilities (info gathered from approx. 20% of facilities that were not publicly
Regional Parking Fee
101
on commercial facilities. While the public facilities tended to pass the entire
burden along to customers, there was evidence that the private facilities
absorbed at least some of the cost, presumably to remain competitive.52
However, absorbing a portion of the cost is obviously better than having to
absorb it in its entirety. More work is needed to determine the specific elasticity of
commercial parking demand in downtown Chicago.
5.2.2 Chicago Retail - Urban Fringe
With this case, we will consider a hypothetical Chicago retail property that is
within city limits, but closer to the outer fringes with no existing control
mechanism for parking (i.e., no pass machine or attendant, so drivers can come
and go freely). Thus, there is no system in place to collect parking charges
directly from drivers. There are approximately 16,000 square feet of leasable
space and approximately 40 parking spaces. While this is a bit lower than the
Cook County minimum for retail use53 , it is more than adequate for the City of
Chicago's minimum requirement for the lower density parts of the city54 . It is
expected that there is greater transit accessibility here than for more suburban
retail locations. It is estimated that a property of this nature will command
approximate $20 per square foot annually. 55
Given general market conditions, an appropriate property level cost structure
could be:
owned) did indicate an interesting difference. In general, revenue-based
elasticities were generally lower than then for the municipal lots. This could be
evidence of rate-cutting to stay competitive (i.e., the private lots were more likely
to pass only a portion of the tax increase along to patrons). Even though they
covered the cost, the revenues for private owners did not suffer as greatly as for
municipal lots were also higher elasticities for lots than for garages, which was
assumed to be a result of the fact that the garages tended to be located in the
city core.
Comparisons with the San Francisco case are limited because (1) it was an ad
valorum tax and this is a flat fee and (2) the rate increases in San Francisco were
much larger than any under consideration in this case.
53 Given that 1 space is required per 300 sq feet, the required amount would be
around 53.
54 No spaces required for first 4,000 square feet then 2 spaces per 1,000 square
feet, which would total 24 in this case.
55 Such an estimate is based on a review of current retail lease listings for the
area and reference to the CB Richard Ellis figures, which report ranges for
suburban Cook County in this approximate area.
52
Incidence & Magnitude
102
Scheduled Gross Income:
Vacancy Allowance:
Effective Gross Income:
Maintenance:
Taxes:
Insurance:
Other Expenses:
Total Expenses:
Net Operating Income:'
$320,000
($21,000)
$299,000
($1,000)
($75,000)
($4,000)
($6,500)
($86,500
$21,500
Table 5.2.2-1: Urban Fringe Retail Property Cost Structure
An additional monthly parking fee expense of $3 per space (totaling $1,440 per
year) would increase total expenses by 2% and cause net operating income to
decline by -0.7%. The more aggressive parking fee levels would have the
following impact:
Annual
Per Space Parking
Fee
Fee
$4 $1920)
$6 ($2,880)
$7
$3360)
New
Operating
Expenses
$(88,420)
Change
in
Operating
Expenses
2.2%
Net
New
Operating
Income
$210,580
Change in
Net
Operating
Income
0.9%
$ ,400) 2.8%
$(88,900)
3.3%
$(89,380)
$210,100
$209,620
1.1%
3.9%
$209,140
1.6%
$(89,860)
1.4%
1.8%
$208,660
4.4%
$(90,340)
S(3(840)
2.0%
$208,180
5.0%
$(90,820)
$1 ($41320)
Table 5.2.2-2: Range of Impacts on Urban Fringe Retail (Property Level)
While the property does feel some impact from the parking fee, the magnitude is
certainly not worth the cost of either hiring an additional employee or install
equipment to collect fees directly from parking space users.
However, there are fewer administrative costs involved in passing the fee along
through rental rate increases. If the facility owner chose to pass this fee along in
the property rental rates, the following rent changes would occur (assuming that
two tenants occupy the property):
Regional Parking Fee
103
Per
Fee
New Annual
Rent per
tenant
Annual Rent
Increase per
Tenant
Rental
in
Change
Rental Rate
$3.00
$20.09
0.4%
$160,720
$720
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$20.12
$20.15
$20.18
$20.21
$20.24
$20.27
0.6%
0.7%
0.9%
1.1%
1.2%
1.4%
$160,960
$161,200
$161,440
$161,680
$161,920
$162,160
$960
$1,200
$1,440
$1,680
$1,920
$2,160
Space
New
Rate
Table 5.2.2-3: Potential Rental Increases for Urban Fringe
However this is assuming that the rent increases by the exact amount of the fee
expense. However, as explained earlier in this chapter, market forces would
probably result in a long-term rent increase that is a fraction of the actual fee. If
the property owner absorbs a portion of the parking fee expense and only
increases rents half as much, even lower rates would result.
If the fee were passed along to the tenant, would it have a significant impact the
cost structure of the leaseholder? For a retail tenant that would want to pass at
least a portion of this fee along, there are generally two options. It can either be
passed along to employees (by paying slightly lower salaries) or passed along to
customers (by increasing the cost of goods). For a relatively small retailer, the
risk of alienating employees with even minor salary adjustments would not be
worthwhile. While the retailer may also be hesitant to pass the cost along through
the price of goods, it would have a lower per-person impact than if it was passed
along to employees. However, it is highly unlikely that such a small rent increase
would be perceived as cause for serious reconsideration of price levels. The
presence of even modest levels of market competition would make retailer price
absorption even more likely. A retailer located along the urban fringe conceivably
faces competition from both suburban and urban retailers. If competitors within
either of these two categories were not passing the tax along to customers, the
urban fringe retailer would likely follow their lead.
Additionally, the potential choices faced by existing property owners is not just
limited to (1) absorption of parking fee costs or (2) passing parking fees along to
others. A minimization of the parking fee impacts could also occur through
elimination of excess spaces. For instance, if the urban fringe retailer happened
to be close to a transit stop or if the majority of customers and employees
traveled by alternative means (car sharing, biking, walking from nearby
developments, etc.), he may decide to convert a portion of his 40-car lot to other
Incidence & Magnitude
104
uses (storage outbuilding, expansion of retail space, creation of outdoor garden
for potential cafe tenant, etc).
Per Space
Fee
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Annual
Parking
Fee
($1,440)
($1,920)
($2,400)
($2,880)
($3,360)
($3,840)
($4,320)
New
Operating
Expenses
Change in
Operating
Expenses
New Net
Operating
Income
Change in
Net
Operating
Income
$(87,940)
$(88,420)
$(88,900)
$(89,380)
$(89,860)
$(90,340)
$(90,820)
1.7%
2.2%
2.8%
3.3%
3.9%
4.4%
5.0%
$211,060
$210,580
$210,100
$209,620
$209,140
$208,660
$208,180
0.7%
0.9%
1.1%
1.4%
1.6%
1.8%
2.0%
Table 5.2.2-4: Urban Fringe Retail Property (Original 40 Spaces)
New Net
Operating
Income
Change in
Net
Operating
Income
Annual
Parking
Fee
New
Operating
Expenses
Change in
Operating
Expenses
$3.00
($720)
$(87,220)
0.8%
$211,780
0.3%
$4.00
($960)
$(87,460)
1.1%
$211,540
0.5%
$5.00
$6.00
$7.00
$8.00
$9.00
($1,200)
($1,440)
($1,680)
($1,920)
($2,160)
$(87,700)
$(87,940)
$(88,180)
$(88,420)
$(88,660)
1.4%
1.7%
1.9%
2.2%
2.5%
$211,300
$211,060
$210,820
$210,580
$210,340
0.6%
0.7%
0.8%
0.9%
1.0%
Per
Space
Fee
Table 5.2.2-5: Urban Fringe Retail Property (Reduction to 20 Spaces)
The change in operating income, and property value, may large enough to justify
elimination of the excess spaces. The option may be even more attractive if the
alternate use is sufficiently productive. For example, if the construction of
additional retail space could mean that rent revenues are increased significantly.
Of course, this will only be possible if the parking reductions are permitted under
local minimum parking requirements. Fortunately, for the transit accessible parts
of the City of Chicago, there will likely be more zoning flexibility. The regulations
are often less accommodating elsewhere in the region.
Regional Parking Fee
105
Overall, the combination of:
adverse parking fee impacts on property values
alternative transportation access
potential for more productive uses of excess parking space
zoning regulations that allow for reduced parking ratios
could result in reductions of the existing parking stock. However, in the absence
of alternative transportation access or zoning revisions, the property owner may
be forced to either absorb the cost or pass it along.
5.2.3 Collar County Office Building
The following case illustrates the potential impact of the parking fee on a
standard, multi-tenant office building in the collar counties. This particular
property is less prestigious class office space (class B or lower), so annual rents
are relatively low at $14 per square feet. It has three floors of office space, with
one tenant typically on each separate floor. The average occupancy rate is
around 90%.
While this office building could be located anywhere in the suburban collar
counties, we will estimate parking requirements based on DuPage County zoning
regulations.56 Given this minimum requirement, there should be at least 142
spaces for this type of property. For the sake of this analysis, this number can be
rounded upwards to 150.
Given the basic characteristics of a property of this type, the annual finance
details are:
Three & three-tenths (3.3) parking spaces each 1,000 square feet of gross
floor area.
56
Incidence & Magnitude
106
Total Leasable Square Feet
Projected Potential Gross
Income (PGI)
Vacancy allowance
43,000
$602,000
$(60,200)
Expected Effective Gross
Income
Projected Operating Expenses
Expected Net Operating
Income
$541,800
$(280,000)
$261,800
Table 5.2.3-1: Collar County Office Building Cost Structure Without Parking
Fee
Assuming that the $3 monthly rate is applied to each of the 150 parking spaces,
the property-level situation will be altered in the following manner:
Total Leasable Square Feet
(based on the building
efficiency ratio times the
gross area)
Projected Potential Gross
Income(PGI)
43,000
$602,000
$(60,200)
Vacancy allowance
Expected Effective Gross
$541,800
Income
$(280,000)
Projected Operating Expenses
$(5,400)
Additional Parking Fee
Operating
Projected
New
$(285,400)
Expenses
Expected Net Operating
$256,400
Income
Table 5.2.3-2: Collar County Office Building Cost Structure With $3 Parking
Fee
In this particular case, the implementation of a $3 parking fee in the suburbs
would result in a 1.9% increase in total operating expenses and a 2.1% decrease
in overall net operating income. The more aggressive parking fee rates would
have the following impacts:
Regional Parking Fee
107
Per Space
Fee
Annual
Parking
Fee
New
Operating
Expenses
Change in
Operating
Expenses
New Net
Operating
Income
Change in
Net
Operating
Income
$3.00
($5,400)
$(285,400)
1.9%
$256,400
-2.1%
$4.00
($7,200)
$(287,200)
2.6%
$254,600
-2.8%
$5.00
($9,000)
$(289,000)
3.2%
$252,800
-3.4%
$6.00
($10,800)
$(290,800)
3.9%
$251,000
-4.1%
$7.00
($12,600)
$(292,600)
4.5%
$249,200
-4.8%
$8.00
($14,400)
$(294,400)
5.1%
$247,400
-5.5%
$9.00
($16,200)
$(296,200)
5.8%
$245,600
-6.2%
Table 5.2.3-3: Range of Parking Fee Impacts on Collar County Office
(Property Level)
If the property owner decided to pass the new fee entirely along to leaseholders,
the annual rents would change in the following manner:
Per Space
Fee
$3.00
4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Change in
New
Rental
Rental
Rate
Rate
1.0%
$14.14
$14.19
$14.23
$14.28
$14.33
$14.37
$14.42
1.4%
1.6%
2.0%
2.4%
2.6%
3.0%
Table 5.2.3-4: Range of Parking Fee Impacts on Collar County Office
(Rental Rates)
Again, the incremental costs to the property owner may be significant enough for
him to consider passing it along. Certainly, any efforts to collect fees directly from
parkers, again, would not be cost effective. In such a case, the property owner
would have to set up a collection mechanism or paid parking pass system, both
of which are likely to have much more than a $16,200 annual cost. On the other
hand, passing along through rental increases could be a reasonable option since
it could have little impact on the tenant's overall cost structure.
Incidence & Magnitude
108
If the property owner did decide to pass the fee along to leaseholders in the form
of rent increases, the cost increase for any of the individual companies would be
minimal, even if the cost were passed in full. Assuming that each tenant occupies
exactly a third of the building, the total changes experienced by each would be:
Per Space
Fee
Change in
Rental
Rate
New Annual
Rent per
tenant
AnnualRent
Increase
$3.00
$4.00
$5.00
1.0%
1.4%
1.6%
$202,673
$203,390
$203,963
$2,007
$2,723
$3,297
$6.00
2.0%
$204,680
$4,013
$7.00
2.4%
$205,397
$4,730
$8.00
$9.00
2.6%
3.0%
$205,970
$206,687
$5,303
$6,020
Table 5.2.3-5: Range of Parking Fee Impacts on Collar County Office
(Annual Rents)
5.2.4 Suburban Retail Center
Now let's consider a typical retail center located a little farther out in a more
suburban, auto-oriented setting. This property consists of an 80,000 square foot,
single story structure located on approximately 8 acres of land. This provides
enough room for two big-box style tenants for which a typical annual rent is $12
per square foot. It is assumed that the leases are long-term and the tenants are
stable, so no vacancy allowance is required.
The minimum parking requirement for retail in DuPage County is five spaces per
1,000 square feet of floor area. Given this condition, the facility should have at
least 400 spaces.
Regional Parking Fee
109
M
Total Leasable Square
Feet
Expected Average
80,000
$960,000
Earnings
Vacancy allowance
Projected Potential
Gross Income (PGI)
$960,000
Projected Operating
Expenses
$(370,000)
Annual Parking Fee
New Operating
Expenses
Expected Net Operating
Income
$(370,000)
$
590,000
Table 5.2.4-1: Collar County Retail Center Cost Structure with no Parking
Fee
The implementation of a parking fee would have the following impact on this type
of facility:
Total Leasable Square
Feet (based on the
building efficiency ratio
times the gross area)
Expected Average
Earnings
$960,000
Vacancy allowance
Projected Potential
Gross Income(PGI)
$960,000
Projected Operating
Expenses
Annual Parking Fee
New Operating
Expenses
Expected Net Operating
Income
80,000
$(370,000)
$(14,400)
$(384,400)
575,600
Table 5.2.4-2: Collar County Retail Center Cost Structure with $3 Parking
Fee
Incidence & Magnitude
110
A monthly $3 per space charge would increase operating expenses from
$370,000 per year to $384,400 per year. This would represent an increase in
operating costs of just under 4% and a decrease in net operating income of
approximately 2.4%. More aggressive parking fee policies would have the
following impacts:
Change in
New Net
Net
Operating Operating
Income
Income
$575,600
-2.4%
Per
Space
Fee
$3.00
Total
Annual
Parking Fee
($14,400)
New
Operating
Expenses
$(384,400)
Change in
Operating
Expenses
3.9%
$4.00
$5.00
($19,200)
($24,000)
$(389,200)
$(394,000)
5.2%
6.5%
$570,800
$566,000
$6.00
($28,800)
$ 398,800)
7.8%
$561,200
-4.9%
$7.00
($33,600)
$(403,600)
9.1%
$556,400
-5.7%
$8.00
($38,400)
$(408,400)
10.4%
$551,600
-6.5%
$9.00
($43,200)
$(413,200)
11.7%
$546,800
-7.3%J
-3.3%
-4.1%
Table 5.2.4-3: Range of Parking Fee Impacts on Collar County Retail Center
(Property Level)
As expected, the parking fee will have a slightly greater impact on existing
properties in the more suburban areas. However, for most parking fee rates
within the given range, the incremental change is still quite minimal.
If the property owner did decide to pass this cost along in the rent (which is
already near the lower end of the range for this type of area), the increases
would be:
Per Space
Fee
New
Rental
Rate
Change in
Rental
Rate
New Annual
Rent per
tenant
Annual
Rent
Increase
$3.00
$4.00
$5.00
$12.18
$12.24
$12.30
1.5%
2.0%
2.5%
$487,200
$489,600
$492,000
$7,200
$9,600
$12,000
$6.00
$7.00
$12.36
$12.42
3.0%
3.5%
$494,400
$496,800
$14,400
$16,800
$8.00
$12.48
4.0%
$499,200
$19,200
$9.00
$12.54
4.5%1
$501,600
$21,600
Table 5.2.4-4: Range of Parking Fee Impacts on Collar County Retail Center
(Rents - Full Pass Along of Cost)
Clearly, the annual increase actually experienced by the tenant is rather minimal,
even in the case that the full amount is passed along. In the more likely case that
Regional Parking Fee
111
the property owner absorbs a portion of the expense and rents increase by only
half as much, the tenant level impact would be:
Per Space
Fee
New
Rental
Rate
Change in
Rental
Rate
New Annual
Rent per
tenant
Annual
Rent
Increase
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$12.09
$12.12
$12.15
$12.18
$12.21
$12.24
0.7%
1.0%
1.3%
1.5%
1.8%
2.0%
$483,600
$484,800
$486,000
$487,200
$488,400
$489,600
$3,600
$4,800
$6,000
$7,200
$8,400
$9,600
$9.00
$12.27
2.3% 1
$490,800
$10,800
Table 5.2.4-5: Range of Parking Fee Impacts on Collar County Retail Center
(Rents - Partial Pass Along of Cost)
According to the Bureau of Labor Statistics, the mean annual salary for cashiers
in the Chicago Metropolitan Area is approximately $17,000. (Bureau of Labor
Statistics, 2004) 57 Consequently, from the perspective of the large retail tenant,
all but the highest fee level (passed along in full) would have no more
significance than the hiring of a single cashier. It is suspected that such a
minimal amount would have zero impact on product price levels within the retail
establishment.
Comparison With Potential Increase in Suburban Sales Tax
As discussed in Chapter 3, the revenue generation potential of the parking fee is
of roughly the same magnitude as the proposed increases in collar county sales
tax. Some parking fee critics claim that it is also comparable with the sale tax in
that it would cause noticeable increases in the price of consumer goods. For
instance,
"Imagine clothes, food, and other tchotchkes at your favorite suburban shopping
mall costing a bit more down the road. Now, imagine that's because the mall has
to pay an annual $10 tax on its parking spaces - a fee aimed at pumping cash
into the Chicago area's mass transit system."
Schaumberg Village President, Al Larson, whose town is home to the Woodfield
Shopping Center, an IKEA store, and countless strip malls, said a parking stall
tax is one revenue source that should stay closed (Daily Herald, Dec 14, 2004)
Would the cost increases caused by the parking fee be as great as the increase
caused by changes in the collar county sales tax ratios? From the perspective of
the typical retail customer, how can the two revenue generation options actually
compare?
Incidence & Magnitude
112
Obviously, if the parking fee is absorbed entirely by the property owner, it is
never passed along to the retail tenant and the tenant would have no cause to
increase the price of goods. In such a case, customers experience zero cost
impacts. If, however, the parking fee is passed along to the tenant, it has already
been demonstrated that the marginal rent increase is likely to be minimal. In such
a situation, the tenant may not perceive product price increases as necessary
and, again, the customer experience is not altered. If the parking fee is passed
down each level and actually appears in the cost of the good, the total customerlevel impact would depend on the retailer's annual sales levels, the number of
available parking spaces, and the parking fee rate.
The type of retail establishment fitting the characteristics for the Collar County
Retail Case is likely to be a discount retailer, grocery store, or homegoods store.
The range of potential annual sales for these types of establishments is quite
large. For instance, a survey of comparable national retailers indicated:
Store
Sales per
foot
Avg.
square
feet per
store
Sales per
Store
$2,849,761
27,141
$105
Big Lots
$5,741,000
37,000
$184
Stein Mart
$5,952,905
34,801
$171
Linens 'n Things
$6,579,056
34,306
$193
Haverty Furniture
$7,091,000
43,238
$164
Sports Authority
$8,273,508
36,129
$229
Bed Bath & Beyond
44,012 $19,337,034
$443
Safeway
58
Table 5.2.4-6: Typical Annual Sales for Suburban Retailer
Based on these figures, it is reasonable to assuming an annual sales range of $2
million through $18 million. If the retailer distributes parking fee related costs
evenly across all sales, for each dollar spent in the store, the prices would
increase in the following manner:
58 Source: www.bizstats.com, as referred by
http://www.hdIcompanies.com/index.cfm?fuseaction=nav&navid=15
Regional Parking Fee
113
Parking Fee Level
___________Proposed
Annual Sales
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$3
$5
$0.0036
$0.0018
$0.0012
$0.0009
$0.0007
$0.0006
$0.0005
$0.0005
$0.0004
$0.0060
$0.0030
$0.0020
$0 0015
$0.0012
$.0010
$0.0009
$0.0008
$0.0007
$7
$
$
10.0028
$0.0021
$0.0017
$0.0014
$0.0012
0.0011
$0.0009
$9
$0.0108
$0.0054
$0.0036
$0.0027
$0.0022
$0.0018
$0.0015
$0.0014
$0.0012
Table 5.2.4-7: Range of Parking Fee Impacts on Retail Prices
For instance, a customer making what would ordinarily be a $20 purchase (not
including sales tax) in a store that averages $8 million in annual sales would pay
$.018 more to cover a $3 parking fee, $.030 more to cover a $5 parking fee,
$.042 more to cover a $7 parking fee, and $.054 to cover a $9 parking fee. While
this is an imperceptible customer expense, it is also a very unlikely scenario. The
customer will only pay this full amount if both the property owner and the retail
establishment refuse to absorb any of the costs. Even a minor absorption of the
fee by the property owner, the leaseholder, or both would further reduce these
values. It should be regarded as the very upper limit of potential parking fee
impact on the average retail customer.
For the sake of comparison, let's examine the guaranteed impact on the
consumer of a potential increase in the collar county sales tax. This impact is
considered guaranteed because any increases in the sales tax will be applied
directly to the consumer; the retail and property owner has absolutely no
opportunity to absorb this added cost.
-
If the collar county sales tax is increased from 0.25% to 0.50%, the
customer will have to pay an additional $.0025 per dollar spent.
-
If the collar county sales tax is increased from 0.25% to 0.75%, the
customer will have to pay an additional $.0050 per dollar spent.
-
If the collar county sales tax is increased from 0.25% to 1%, the customer
will have to pay an additional $.0075 per dollar spent.
Based on these facts, the implications of sales tax increase for a standard $20
purchase are:
-
If the collar county sales tax is increased from 0.25% to 0.50%, the
customer will have to pay an additional $0.05 in taxes on a $20 purchase.
Incidence & Magnitude
114
-
If the collar county sales tax is increased from 0.25% to 0.75%, the
customer will have to pay an additional $0.10 in taxes on a $20 purchase.
-
If the collar county sales tax is increased from 0.25% to 1%, the customer
will have to pay an additional $0.15 in taxes on a $20 purchase.
As a result, only the highest parking fee level (passed along in full from property
owner to retailer to consumer) would result in a per dollar cost to the suburban
customer comparable to the lowest proposed sales tax increase. In other words,
a relatively large $9 per space fee would be needed to have the same consumer
level impact as a low 0.25% increase in collar county sales tax rates. Of course,
in terms of revenue generation, these two strategies are not comparable. Recall
from Chapter 3 that the $9 per space fee would generate an estimated
$432,000,000 annually and that a 0.25% increase in sales tax would only
generate $128,746,000 annually. From the perspective of the suburban
consumer, there is absolutely no question that the parking fee option is vastly
superior.
5.3
Future Developers of Parking Facilities
In the case of the urban fringe retailer discussed above, we saw that it is possible
that a combination of factors, only one of which is the parking fee, could affect
the number of spaces constructed. Given the combination of:
adverse parking fee impacts on property values
alternative transportation access
potential for more productive uses of excess parking space
zoning regulations that allow for reduced parking ratios
a developer may decide to construct fewer parking spaces.
In fact, if service improvements are significant enough, it could have substantial
positive impacts on property values. Illustrated below are two cases (inelastic
and elastic property supply) in which the parking fee eventually results in greater
accessibility (either through improved transit or reduced congestion), thus
pushing the demand curve outward. As a result, both the price of property and
the quantity is increases. In such a case, the market-wide prices and quantity are
actually higher than they were prior to the parking fee. This market change could
certainly influence development location decisions. Additionally, the congestion
mitigation impacts of increased service levels could have a positive impact on
property values throughout the region.
Regional Parking Fee
115
With Parking Fee
Price
Supply
(Long-run)
P4
.. .
..
.. .........
. ...........
..
P3
P1
........
......
....
.....
Demand B
Demand A
Q4
Q3 Q1
Quantity
Figure 5.3.1: Impact of enhanced transit service when property supply is
relatively inelastic
|
-.
With Parking Fee
Price
Supply
(Long-run)
P4
.. . . . . . .
.........
........................
P3.
..........
......................
P1
Demand B
Demand A
Q3
Q1 Q4
Quantity
Figure 5.3.2: Impact of enhanced transit service when property supply is
relatively elastic
Incidence & Magnitude
116
5.4
Chapter Summary
While the statutory incidence of the parking fee is on the region's commercial
property owners, it is theoretically possible that they will attempt to pass the
expense along to tenants, customers, or employees. Given simple economic
theory, a property owner that tries to pass the fee along would have to contend
with reductions in market demand, and ultimately reductions in property values.
However, a market response can occur only if the magnitude of the cost is great
enough to impact behavior. Whereas the fee may be a significant burden for the
property owner, it may be much less perceptible to the tenant if passed along in
rental rates. While it is very rare that the fee will be passed directly from the
property owner to the driver, it is possible that at least a portion will be passed
along from property owner to tenant and from tenant to customer. In this case, by
the time the fee reaches the tenant, it will be barely noticeable; in most cases it is
even less noticeable than a 0.25% increases in sales tax.
Regional Parking Fee
117
6 Implementation Challenges & Strategies
By this point, we have succeeded in countering a number of major
misconceptions (Chapter 4) and have demonstrated that the property level
impact of a modest fee would be relatively minimal (Chapter 5). However,
although necessary for eventual implementation of a parking fee policy, these
conclusions are not sufficient. Before actual implementation can be achieved, it
will be crucial to resolve a host of legal, political, and institutional complications.
6.1
Legal
6.1.1 Fee versus Tax
Throughout this thesis, the proposed policy has been referred to as a fee rather
than as a tax. This is not just a matter of word choice; rather it is a recognition
that a fee structure would be more advantageous from the perspective of the
transit authority. On the most basic level, the word fee certainly has a less
negative connotation than tax. Additionally, it is potentially more possible to apply
a fee to all lots throughout the region, including facilities that would typically be
exempt from taxes. After all, tax exempt organizations such as schools,
hospitals, and churches place as great a burden on the regional transportation
network as any commercial entity.
Of course, in order to call this strategy a fee, it is necessary that it possess the
characteristics of a fee. In general, there need not be a direct logical connection
between a specific taxed activity and the actual use of funds. A perfect case is
the existing sales tax. There is no direct connection between the act of
purchasing goods and the act of operating transit infrastructure, yet revenues
from the former are used to finance the latter. In contrast, a fee requires a more
direct connection.
Tax: it is not as necessary to rigorously prove that a relationship exists between
the taxed good (parking) and the use of funds (transit operations finance).
However, if the policy is called a tax, it will not apply to any entities categorized
as "tax-exempt."
Fee: It is often legally necessary to prove that there is a linkage between the
good on which the fee is paid (parking) and the use of funds (transit operations
finance). Generally, a fee indicates that one is paying for the use of something. In
turn, the fee revenues can be used to mitigate the impacts of usage, which in this
case are high congestion levels and lack of adequate regional accessibility.
Implementation Challenges & Strategies
118
6.1.2 Relationship to Impact Fee
If this is called a fee, a number of legal issues may arise, particularly in how it
may fit within the definition of an impact fee. An impact fee is typically designed
to compensate for the externalities of new development. Similarly, the parking
fee is intended to compensate for the incremental impact on the transportation
system generated by each additional available parking space.
However, most impact fees are administered only once (at the time of
development) and the funds are often used to support the additional capital
needs of the system. The parking fee, on the other hand, would be an annual
charge, with revenues going directly support transportation operating expenses.
This makes sense: while the capital impacts of a development are generally
isolated, one-time events (necessity for construction of wider roads, more
roadway signage, enhanced drainage system, etc), the transportation operating
burden created by additional parking spaces constitutes an on-going expense.
(i.e., a parking space today will cause higher transportation operating costs for
many years to come).
It would not be unexpected for this issue to be taken up by Chicago area impact
fee opponents. Impact-fee related conflicts have been recorded by the media in
Aurora, Oswego, Yorkville, Geneva, St. Charles, Batavia, Naperville, Montgomery, Somonauk, Fox Lake, Lisle, and Woodstock. (Baden & Coursey, 2002,
p.2) While the majority of Chicago-area cases have focused on residential
developments, there is nothing to prevent a coalition of commercial landowners
from challenging the fee.
6.1.3 Legal Implications
In recent years, the constitutionality of impact fees has been challenged by
landowners claiming that they are merely property takings in disguise. The two
major court cases that established precedent for these claims are Nollan v.
California Coastal Commission (1987) and Dolan v. City of Tigard (1994). Nollan
found that the Fifth Amendment limits the ability of government to extract
concessions from landowners only to situations where there is a ''rational nexus"
while Dolan specifies that there must also be "rough proportionality" and between
land exaction and the developmental impact. (Breemer, 2002) Ultimately, there
must be an essential nexus between the property exaction and the externality
that funds are meant to mitigate.
"The rational nexus test has two requirements. First, the municipality must
demonstrate the existence of a "reasonable connection between the need for
facilities and the growth generated by the new development." Then, there must
exist "a reasonable connection between the expenditure of the fees collected and
Regional Parking Fee
119
the benefits received by the development" that paid the fees." (Baden & Coursey,
2002, p. 4)
Lucas vs. South Carolina Coastal Council (1992) complements these cases by
finding that any exaction that severely impairs the economic use of the property
should also be considered a taking. ("there are good reasons for our frequently
expressed belief that when the owner of real property has been called upon to
sacrifice all economically beneficial uses in the name of the common good, that
is, to leave his property economically idle, he has suffered a taking." [US
Supreme Court opinion, Justice Scalia].) 59
Although neither Nollan nor Dolan dealt specifically with exactions in monetary
form (such as with impact fees), many impact fee disputes have referenced these
two precedent-setting cases.60 Some courts have found that monetary exactions
are similar in nature to the land exactions examined in these two earlier
decisions. However, in a number of other cases, Nollan and Dolan were found
irrelevant if (1) monetary exactions, such as an impact fee, rather than land
exactions are involved or (2) the exaction is part of "generally applicable"
legislation, as opposed to a potential "plan of extortion" aimed at a specific
landowner (defines difference between legislative and administrative exactions).
In other words, cases that fit into at least one of these categories have often not
been subject to ''essential nexus"l and "rough proportionality" requirements.
As documented in:
http://www.law.georgetown.edu/gelpi/takings/courts/index.htm
59
Some background cases:
Ehrlich v. City of Culver City (1996): "California Supreme Court clearly endorsed the
applicability of Nollan and Dolan to monetary exactions" "It is the imposition of landuse conditions in individual cases, authorized by a permit scheme which by its nature
allows for both the discretionary deployment of the police power and an enhanced
potential for its abuse, that constitutes the sin qua non for application of the intermediate
standard of scrutiny formulated by the court in Nollan and Dolan."
60
Krupp v. Breckenridge Sanitation District (2001): "There was no physical taking here.
The PIF is not an exaction of land; rather it is a generally applicable service fee designed
to defray the costs of expanding the wastewater treatment system directly caused by the
new development. Because Nollan, Dolan, and their progeny applied heightened scrutiny only
where the government demanded real property as a condition of development, we find that they
are not applicable to a general development fee."
San Remo Hotel v. San Francisco(2002) : "In determining that the fee was subject to deferential
review, rather than the essential nexus test, the court focused on the fact that the fee was imposed
pursuant to a "generally applicable" city ordinance that required all residential hotels wishing to
convert to tourist uses to build replacement units or pay an
in-lieu fee sufficient to cover the cost of such units."
Implementation Challenges & Strategies
120
Fortunately, the proposed parking fee would actually fall into both categories.
However, it is important to be aware that there have been some inconsistencies
in court decisions regarding this matter. For instance, J.C. Reeves Corp. v.
Clackamus County (1994) indicated that the Nollan and Dolan findings are
indeed relevant in the case of "generally applicable" legislation that involves
monetary exactions.
Furthermore, Breemer has argued that the exemption of monetary exactions
from the essential nexus test runs counter to the spirit of the requirement. If it
was intended to protect against undue shouldering of public burden, then it
should apply to all types of property, including money. There are suggestions in
related cases that the Supreme Court would consider ''essential nexus"
applicable to monetary exactions. It is also argued that the "generally applicable"
legislation requirement should also be disregarded. From this perspective, broad
legislation permitting exactions does not magically remove the "takings" label.
6.1.4 Illinois Specific Legislation
The O.L. Krughoff et al. v. City of Naperville case established that rational nexus
was too general a term for Illinois courts and "specifically and uniquely
attributable" was preferred. (Baden & Coursey, 2002, p. 5) However, this
terminology clarification does not mean that impact fee related cases in Illinois
are any more straightforward than they are elsewhere.
Given the level of disagreement that still exists regarding this matter, it should be
assumed that any proposed parking fee could potentially be criticized on the
basis of essential nexus (or, to use Illinois-specific terminology, "specifically and
uniquely attributable"). Even if there is legal precedent for exemption from these
requirements, it is not certain that this specific parking fee will be found exempt.
This potential for litigation necessitates preemptive development of a solid
essential nexus argument.
6.1.5 Potential Legal Argument: Externalities of Greenfield Commercial
Development
One way to demonstrate essential nexus and rough proportionality is by showing
that commercial parking facilities impose significant external impacts on society
that are not covered by standard property taxes. Of potential use is a Chicagobased study that estimated the external costs of suburban firm relocation (Persky
and Wiewel, 1996). When considering the costs of new development, the
researchers distinguished between the typical public sector costs and the larger
societal costs. While it was suggested that commercial development actually
generate enough in property taxes to cover the public sector costs (typically
operations and maintenance of public infrastructure), there is little accountability
for the larger societal costs.
Regional Parking Fee
121
In general, firms that chose to locate in the collar counties rather than in Chicago
or the inner suburbs (Cook County) encountered lower overall private costs.
These include lower wages, land prices, construction costs, and taxes. These
advantages create a demand for suburban space that benefits the suburban
landowner through increases in property values. Yet the development of
peripheral greenfield land for commercial use is found to impose significant
additional social costs that would not be incurred in the case of more centrally
located development of brownfield properties. These additional social costs
include:
Higher Congestion
Greater Auto Accident Incidence
More Air Pollution
Loss of Open Space
Increase in Housing Abandonment
Labor Market Spatial Mismatch
Totals
$150
$30
$10
$2
$25
$300
$517
$500
$45
$650
$70
$300
$900
$2,465
Table 6.1.5-1: Additional annual social costs imposed by each new
suburban employee in the Chicago area, as compared with the peremployee costs of urban development (Persky & Wiewel, 1996)
Using these assumptions, it can be estimated that a 200-employee business
that chooses to locate in outer Will County rather than locating within the City
of Chicago would generate a minimum of $103,400 in additional annual costs
to society. Currently, there is no way to hold the suburban business or
landowner accountable for these costs.
Implementation Challenges & Strategies
122
$29,820
$10,340
$59,640
$89,460
$119,280
$149,100
$178,920
$20,680
$31,020
$41,360
$51,700
$62,040
340
360
380
$208,740
$238,560
268,380
$298,200
$328,020
$357,840
$387,660
$417,480
$447,300
$477,120
$506,940
$536,760
$566,580
$72,380
$82,720
$93,060
$103,400
$113,740
$124,080
$134,420
$144,760
$155,100
$165,440
$175,780
$186,120
$196,460
400
$596,400
$206,800
.o
4
106
120
1
Table 6.1.5-2: Additional annual costs imposed on society by greenfield
business location, based on number of employees.
Regional Parking Fee
123
Number of
Parking Spaces
20
40
60
80
100
120
140
160
180
200
220
240
260
280
300
320
340
360
380
400
$1,440
$2,880
$4,320
$5,760
$7,200
$8,640
$10,080
$11,520
$12,960
$14,400
$15,840
$17,280
$18,720
$20,160
$21,600
$23,040
$24,480
$25,920
$27,360
$28,800
Table 6.1.5-3: Annual Costs of Parking Fee, based on number of spaces
provided
At this time, commercial property owners do not take these implications into
consideration when calculating costs and benefits of greenfield development. A
parking fee could begin to account for these. Appendices A and B show that, in
most cases, the proposed parking fee only covers a portion of the annual lowestimate societal costs of greenfield development. The only cases in which the
parking fee exceeds the cost to society are those with very extreme parking
space to worker ratios.
Under the parking fee policy, property owners should understand that they are
completely free to build parking facilities to potentially enhance property values.
Implementation Challenges & Strategies
124
As a result, they gain access to a free transportation network that delivers
employees and customers directly to their doors. But with every space that they
add and maintain on an annual basis, there are increasing societal costs. In
order to mitigate these costs, increased transportation funding is needed. The
fees will not go to roadway improvements because, historically, roadway
expansion simply cannot keep up with the growing mobility demands of the
region (Figure 6.1.1). If true impact mitigation is to be achieved, more financial
support for public transportation or alternative mobility initiatives is the only
feasible option.
Available Lane Miles per 1,000s VMT
0.13
0.12
0.11
4
01
-$-Lane
Miles per 000
00
~VMT
0.09 -
0.08-
0.07
Year
Figure 6.1.1: Comparison between Chicagoland available roadway capacity
and vehicle miles traveled (TTI)
6.1.6 Vehicle Purchase Cost
An additional externality that was not considered in the Persky & Wiewel
study is the cost of additional automobile purchases bourn by employees.
Regardless of residential origin, employees commuting to workplaces in the
Regional Parking Fee
125
outer suburbs are more likely to drive to work alone than employees
commuting to workplaces located closer to the urban core. Options such as
transit, carpooling, biking, and walking are often simply not available for those
that must reach relatively remote work locations. Such exclusive need of an
automobile places a significant annual financial burden on the employee.
According to 2000 Census data, the average share of commuters to the outer
counties (Lake, DuPage, McHenry, Will, and Kane) that drive alone is
approximately 80% and the share of commuters to the City of Chicago that
drive alone is just under 50%.61
This is not meant to imply that 50% of commuters with city work destinations
have absolutely no access to a private vehicle. Many of these workers may
reside in a household with at least one car that is either used by other members
for work commutes or shared for non-work purposes. However, the fact that 50%
of city-bound commuters can reach their destinations without the aid of an
automobile means that an additional vehicle need not be purchased specifically
for this purpose. On the other hand, at least 80% of suburb-bound employees
must have exclusive access to an automobile on a daily basis.
61
Implementation Challenges & Strategies
126
Figure 6.1.2: Commute mode
Figure 6.1.2: Commute mode split by county of destination (2000 US
Census)
Regional Parking Fee
127
Figure 6.1.3: Commute mode split by town/city of destination (US Census,
2000)
Implementation Challenges & Strategies
128
e Mode
orkTransstin
Commut
44m,
ation
TAZ
40 Water Area
Transit Lne
a
TAZ Chart
W
Drove Alone
2 person Carpool
3 person carpool
4 person carpool
Bus/Trolley
6- Streetcar/Elevate d
W RR/Ferry
e
e
Wk/Bike
0
.8
.4
1.2
Miles
Figure 6.1.4: Commute mode split by transportation analysis zone of
destination - Focus on Chicago's Loop Area (US Census, 2000)
According to the American Automobile Association (AAA), the average annual
costs of owning a car in 2004 was $6,541. This figure accounts for gasoline,
maintenance, insurance, registration, finance charges, and depreciation. Given
that there is an 80% probability that a worker in the outer suburbs will face an
annual car ownership cost of $6,541, the weighted cost per employee is
approximately $5,253. Since the probability that a worker will drive alone to a job
in the city is about 50%, the weighted per employee car ownership cost
generated by urban business location is only $3,270. The difference between the
two, $1,983, can be interpreted as a very rough estimate for annual per
employee cost of suburban business location.
While this may not be the most accurate way to estimate the added employee
cost of exclusive automobile ownership, it does raise some interesting issues. At
least in this calculation, the extra cost of car ownership is actually larger than the
Regional Parking Fee
129
minimum estimate of all of the societal cost combined and about half that of the
very upper estimate. In either case, the individual cost of needing a car for the
work commute is substantial. How could a more accurate cost be calculated?
Additionally, it is not clear whether this should be considered another externality
or a form of consumer surplus. Given such lingering questions, the issue of car
ownership should definitely be an area of future study (see section 7.4 for more
Future Study issues).
6.2 Political
One of the most contentious issues will be how the parking tax revenue is
distributed. It would be politically infeasible to earmark the entire revenue stream
for CTA budget purposes. The following distribution options are worth
consideration:
6.2.1 Use Existing RTA Formula
On the surface, the simplest option would be to direct all parking fee revenues
into the larger RTA funding pool and distribute according to established sales tax
formula guidelines. From Chapter 3, we know that the estimated shares of fee
contributions are:
Approximate Contribution to Total
Parking Fee Revenues
Chicago
21%
Cook (excl.
Chicago)
35%
Will
6%
DuPage
Kane
18%
6%
Lake
McHenry
9%
5%
Figure 6.2.1: Share of parking fee contributions based on (CB Richard Ellis
2004, US Census 2000)
Implementation Challenges & Strategies
130
Recall that the distribution of the current RTA formula is:
CTA
100%
30%
0%
METRA
0%
55%
70%
PACE
0%
15%
30%
Table 6.2.1-1: RTA distribution formula (RTA)
If a parking fee of $3 is imposed across the region and we assume that there are
approximately 4 million eligible spaces, $144 million will be raised annually. Of
this amount 85%, or $122.4 million, will be distributed by formula. The remainder
will be distributed at the discretion of the RTA. The $122.4 million would be
distributed in the following manner:
t-
Pa
I
s-
$23,789,468
$37,649,469
$6,488,037
$16,135,487
$61,438,936
$22,623,523
$122,400,000
Table 6.2.1-2: Approximate distribution of parking tax fees using existing
formula ($3 rate)
In the case that a $6 parking fee is levied (resulting in an annual revenue stream
of $288 million, of which $244.8 million is distributed according to formula), the
following distributions can be expected:
$50,722,935
$25,952,146
5-etra$47,578,935
-Pace $12,976,073
$$75,298,937
$32,270,973
$76,675,081
$122,877,872
$45,247,046
$244,800,000
Table 6.2.1-3: Approximate distribution of parking tax fees using existing
formula ($6 rate)
In the case that a $9 parking fee is levied (resulting in an annual revenue of $432
million, of which $367.2 million is distributed according to formula), the following
distribution levels can be expected:
Regional Parking Fee
131
$76,084,402
$
SPae$-
$38,928,220
Me$71,368,403
$19,464,110
$$112,948,406
$48,406,460
$115,012,622
$184,316,809
$67,870,570
$367,200,000
Table 6.2.1-4: Approximate distribution of parking tax fees using existing
formula ($9 rate)
In the case that the existing distribution formula is used, the parking fee will not
be effective in solving the CTA's budget crisis unless the per-space rate is well
beyond the upper portion of the proposed range. Thus, simply in terms of finding
a solution to the existing budget challenges, this is not the ideal way to distribute
the parking fee revenues. Additionally, continued reliance on the established
formula would propagate the silo mentality and serve as a barrier to a regional
perspective on congestion mitigation.
6.2.2 Alter Existing RTA Formula
Given the drawbacks discussed in Chapter 2, a revision of the 1983 formula
would certainly make sense. Implementation of a new distribution formula was
one of Kirschbaum's (2004) main recommendations and the CTA has been a
vocal advocate. Additionally, the State's House Committee on Mass Transit,
chaired by Representative Julie Hamos, recently produced a highly critical
analysis of the funding formula and called for a region-wide effort to remedy
structural flaws. (House Committee on Mass Transit, 2005)
However, there remains a great deal of political opposition to all reallocation
strategies. Specifically, Metra contends that a reformulation would benefit urban
service at the expense of suburban service. The battle lines have been clearly
drawn and there is no indication that Metra will relent on this issue, at least in the
near future. If the goal is to implement the parking fee as soon as possible, it
would be risky to condition it upon a massive overhaul of the RTA distribution
formula.
6.2.3 Use New Criteria for Distribution of New Revenue Streams
Alternatively, the new funding stream could be distributed entirely based on other
measures. Some potential measures include annual ridership, annual vehicle
revenue miles, and annual vehicle revenue hours (also annual passenger miles?)
This could be an opportunity to establish an official formula component that is
based on actual service need; those agencies that provide more service will
receive a greater share of the funding.
Implementation Challenges & Strategies
132
Table 6.2.1-5: 2003 Annual Ridership and Vehicle Revenue Hours for RTA's
Three Service Boards (APTA)
Based on these potential measures, the three agencies would receive the
following shares of expected revenue streams for the $3/space rate and the
$6/space rate:
Table 6.2.1-6: Shares of parking revenues if distributed according to
performance measures, based on $3 monthly per-space rate
Table 6.2.1-7: Shares of parking revenue if distributed according to
performance measures, based on $6 monthly per-space rate
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133
Table 6.2.1-8: Shares of parking revenues if distributed according to
performance measures, based on $9 monthly per-space rate
Even if this type of formula is used to distribute the majority of parking fee
revenues, a percentage of the funding can also be set aside for special
performance improvements incentives. Individual service boards could receive
additional funding if they meet benchmarks or demonstrate improvements in
such areas as:
- Reliability (both in terms of on-time performance and low equipment breakdown
rates)
- Safety
- Customer satisfaction
- Employee satisfaction/retention
(Transit Research Board, 2004)
For instance, assume that the parking fee is $6, achieving an expected annual
revenue generation of $288 million. Of this $288 million, 85% will be distributed
according to annual ridership levels. For the sake of analysis, ridership levels for
2003 will be used. The remaining 15% could then be used to reward actual
increases in ridership levels from the previous year.
A potential variation on this approach is to use a portion of the total revenues for
special regional mobility projects implemented by specific municipalities or
counties. This could be a way to further build regional support for the parking fee.
Ideally, these smaller projects would complement existing transit services and
enable less dependence on automobiles throughout the region. Biking/walking
paths, station upgrades, park & ride lots6 2, HOV lanes, priority sign utilization,
and street calming projects would all fall within this category.
There are a number of ways to structure a revenue sharing program. On one end
of the spectrum, the RTA could manage the mobility projects directly, resulting in
strong control over every aspect. On the other end of the spectrum, the money
could be given directly to the municipality, granting local officials complete control
over project selection and implementation. Some variations in the middle would
Implementation Challenges & Strategies
134
include special qualification restrictions for projects (for example, a new roadway
lane would not qualify as a general mobility project and some transit authority
oversight of project implementation (perhaps in the case that local jurisdictions
lack the capacity to efficiently implement larger construction projects).
Somewhere between the two extremes is the case of the Houston Transit Tax.
Houston METRO receives dedicated funding from a regional 1% sales tax, 25%
of which is used for general mobility projects throughout Houston, Harris County,
and 14 enclave cities. While METRO does have a role in the implementation, the
recipient entities appear to enjoy a high level of freedom in the selection of
projects.
A number of distribution schemes could be employed. First, the percentage of
revenues dedicated to regional mobility projects would have to be determined
Clearly, there must be a balance between the needs of transit operations and the
counties. If too large a percentage of revenues is dedicated to mobility projects,
the primary goal of sustainable transit operations may not be met. However,
there will be few political advantages if the annual amounts promised to the
municipalities/counties are regarded as insignificant.
Fee Rate
Total Revenues
5%
10%
25%
$3.00
$144,000,000
$7,200,000
$14,400,000
$36,000,000
$4.00
$192,000,000
$9,600,000
$19,200,000
$48,000,000
$5.00
$240,000,000
$12,000,000
$24,000,000
$60,000,000
$6.00
$288,000,000
$14,400,000
$28,800,000
$72,000,000
$7.00
$336,000,000
$16,800,000
$33,600,000
$84,000,000
$8.00
$384,000,000
$19,200,000
$38,400,000
$96,000,000
$9.00
$432,000,000
$21,600,000
$43,200,000
$108,000,000
Table 6.2.1-9: Potential parking fee amounts to be reserved for performance
improvements and/or regional mobility projects
Once the total percentage has been determined, a method of regional distribution
is needed. Funds could be distributed based on:
- The number of transit trips originating in the municipality/county during the
previous year
- The VMT-reduction potential of proposed projects (as determined by the
transit authority)
- The VMT-reduction successes of projects implemented during previous
years
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135
-
6.3
The municipality's efforts to establish more transit-friendly zoning and a
comprehensive plan to coordinate pedestrian, bicycle, and transit
amenities
Institutional
6.3.1 RTA Responsibilities & Structure
With the creation of an additional funding source and a new focus on service
performance measures, there must be formal alternations to the RTA's purpose,
goals, and procedures. These changes should be clearly outlined in amendments
to the RTA Act. Major attention should be paid to the following issues:
First, there is the danger that the prospect of even higher revenues will make the
RTA board an unintentional advocate of parking lot expansion. Clearly, an
increase in parking supply runs counter to the mobility goals of the region. In
order to prevent this from happening, the RTA must be responsible for more than
just the regional transit revenues; it must also bear responsibility for regional
mobility levels. The RTA would be required to produce annual reports on the
region's mobility characteristics. This could be based on some of the measures
employed by the TTI, but would ideally analyze conditions on a more detailed
level. Of particular importance would be a critical look at the mobility impacts of
funding level increases. It is assumed that more funding will lead to enhanced
service levels, which in turn should have a positive impact on ridership levels. An
indirect effect could be reductions in congestion and other automobile-related
externalities. However, these outcomes should not be taken for granted. Each
year, the RTA must examine changes in key regional performance measures and
determine whether progress is actually occurring. If the RTA is held accountable
for annual mobility improvements, it is very unlikely that it will look favorably upon
parking lot expansion.
However, funding needs will not remain at current levels forever and it is
expected that the RTA will eventually seek parking fee revenue increases. Since
expansion of the parking supply would conflict with one of its fundamental
responsibilities, the board must have the power to increase fee rates. In keeping
with the "regional mobility" logic of the parking fee initiative, such increases
should be conditional upon evidence of performance improvements. If the annual
reports demonstrate that higher funding levels are having a significant positive
impact, then rates can be increased accordingly.
Ultimately, the RTA's new responsibilities and focus could make the approach to
board composition seem very outdated. The population-based allocation of board
positions may have made sense under the original structure, but would not
adequately reflect the revised purpose of the RTA. An appropriate revision of the
Implementation Challenges & Strategies
136
board composition would take at least make some consideration of service
provision and ridership levels.
6.3.2 Cost of Implementation
It is important to keep the implementation costs as low as possible so that the
largest possible percentage of parking fee revenues actually reach the
operations budget. If this is an excessively expensive program to implement, it
becomes less desirable than other revenue sources such as the collar county
sales tax increase.
Fortunately, the Perth case offers some potential strategies. At the very
beginning of the program, it was the responsibility of all property owners in the
target area to obtain a parking license, which carried an annual fee of $70 AU
(approximately $52 USD at current exchange rates). Some properties did qualify
for exemptions, but everyone still hade to get the license. (Brown, 2001) The
reporting responsibility is entirely that of the facility owner. Before full
implementation, Perth invested in the distribution of comprehensive educational
materials to all eligible property owners. It was made clear that a failure to obtain
the license, if discovered by officials, would result in significant penalties. A
modest upfront investment could mean that less is spent on enforcement later
on. The implementing agency could avoid exhaustive parking space surveys in
which every eligible lot must be officially counted. Instead, they only require
resources to process annual license applications and to conduct regular spotchecks of facilities. However in order for this system to work in Perth, parking tax
officials had to be granted the authority to enter and inspect property.
Perth's program has an added layer of complexity because it permits facility
owners to only pay taxes on spaces that are currently in use. Since the Chicago
program would most likely require a fee on all spaces regardless of use status,
implementation should be simpler and slightly less costly than Perth's.
An additional benefit of the "license for everyone" system is the ability to gather
complete data on parking demand locations. A detailed, up-to-date database of
all potential parking locations throughout the metropolitan area is likely to be
quite valuable for broader transportation planning purposes.
One of the more common criticisms of the existing City & Cook County parking
taxes is that the reporting procedures are overly complex. Rather than simply
reporting annual revenues, facility operators must submit detailed accounts of
transaction types. There is a great deal of confusion and some evidence that
operators often end up paying incorrect tax amounts. (Berk & Associates, 2002)
By simply requiring facility owners to submit an annual update of parking supply,
the process is streamlined significantly.
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6.4
Chapter Summary
The RTA must be prepared to address major legal, political, and institutional
challenges.
In the case that the fee is challenged as a form of property taking, it may be
necessary to provide evidence of essential nexus and rough proportionality. One
way to show this is by comparing the modest fee rates with rough estimates of
societal costs imposed by greenfield commercial developments.
When determining the procedure for distributing fee revenues, the RTA must
favor approaches that actually recognize the importance of regional mobility.
Absolute levels of ridership or vehicle hours could serve as the basis for the
parking fee distribution formula, with some funding set aside to reward specific
service improvements. A portion of the funding could also be reserved for special
mobility projects throughout the region, thus creating incentives for counties and
municipalities to pursue alternative transportation initiatives.
With this new focus on mobility measures, the RTA's responsibilities will change.
The RTA will be in charge of producing regional mobility reports on at least an
annual basis. Of particular interest should be the impact of increased funding on
performance. If is found that higher funding levels are resulting in significant
improvements, the RTA can exercise its power to increase fee rates. Detailed
guidelines for this new accountability should be incorporated as amendments to
the RTA statute.
Finally, it is important that the implementation of the fee be as easy and
inexpensive as possible, both for the RTA and the property owners. While the
owners will be expected to report parking supply levels, they will not be required
to submit complicated records of revenue or usage.
Implementation Challenges & Strategies
138
7 Conclusion
7.1
Summary of Ideas
From a regional mobility perspective, Chicagoland is in serious trouble. While, on
the surface, it seems as though the transportation crisis is limited both temporally
(to the 2005 fiscal year) and geographically (to the CTA service area), there have
been regional problems for over twenty years. Chicagoland has gone from
having the seventh worst congestion delays in the nation to having the second
worst. For twenty years, the region has endured transit budget crises, fare hikes,
service cuts, and steady increases in congestion without once reconsidering its
approach to public transportation finance. As Federal subsidies were eliminated,
ridership declined, paratransit costs escalated, and capital funding
responsibilities shifted, the RTA never initiated a critical re-evaluation of its own
role. An inappropriate funding distribution process and chronic budget shortfalls
left the transit system poorly equipped to meet the region's mobility needs, yet no
effective solutions were even identified. The consequences of this inaction are
evident. In 2003 alone, congestion cost the region $4.27 million. Although an
impressive $1.6 million in additional congestion costs were mitigated by transit
operations, at a relatively low public cost of $907 million, there have been no
coordinated efforts to determine the potential benefits of higher funding levels.
Now, as the region faces a particularly severe budget crisis, it is time to finally
begin the discussion that should have commenced two decades ago. The region
must alter its approach to transit finance and an additional funding source must
be immediately identified. The implementation of a region-wide, non-residential
parking fee could help achieve both of these goals. When considering the
potential of such a strategy, there are a several key components:
7.1.1 Reframe transit as a regional concern
While the current budget crisis is often perceived as specific to the CTA, any
reduction in urban transit service provision is a threat to the entire metropolitan
region. The dividing line between "urban" and "suburban" interests is becoming
increasingly blurred and intraregional feuds simply serve as distractions from the
real issues. The economic health and global competitiveness of the entire region
are ultimately at stake. Rather than battling over scarce resources, it must be
realized that a greater focus on regional mobility will benefit everyone. While
stakeholders from varied parts of the region may feel as if they have nothing in
common, a unified approach can easily be based on the fact that congestion
affects everyone in some way.
7.1.2 Identify the most appropriate strategy
The flaws of the existing finance structure certainly present a potential
opportunity for change. Specifically, increases in the collar county sales tax and a
restructuring of the RTA distribution formula are reasonable goals. However, the
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139
CTA has repeatedly tried to bring this idea to the table and each time it has met
with tremendous regional opposition. Given the urgency of the budget situation,
proponents of sales tax restructuring have to start asking themselves if this is a
winnable battle or if resources should be used in the pursuit other solutions. By
spending so much energy emphasizing the drawbacks of the existing tax
structure, they may perhaps be creating more enemies than allies. Assuming that
progress on the current issues is stalled, it is crucial to identify a less
controversial plan. A modest, regional, non-residential parking fee would have a
number of advantages over the sales tax proposal:
-
Potentially more feasible from a political standpoint
-
Substantial revenue generation potential
-
Applied uniformly across Chicagoland, thus encouraging a more regional
mentality
Incidence not directly on the general population
Logical nexus to congestion externalities
Potential for funding growth if transit service improvements can be
demonstrated
-
-
7.1.3 Anticipate and Counter Basic Misperceptions
It is likely that such an innovative strategy will incite speculation regarding
potential impacts. Anticipating major misperceptions and addressing them from
the beginning can diffuse a great deal of potential opposition. The major
clarifications include:
-
Beliefs that the parking fee will either be imposed exclusively on the collar
counties or will have a disproportionate impact on these outer areas are
exaggerated. In reality, an appropriate fee will be implemented uniformly
across the region and will have a much lower impact on the collar counties
than the sales tax increase alternative.
-
A parking fee of this nature will not force economic activity to locate
elsewhere. First, many advantages specific to certain central locations will
far outweigh the costs of the parking fee. Additionally, assuming that the
fee revenues will be used to improve the regional transportation network,
business activity will ultimately benefit. In fact, it is possible that a very
successful transportation finance initiative could attract even more
business activity to the region, particularly in areas with enhanced transitaccessibility. Finally, the large size of the implementation area guarantees
that businesses would have to move a tremendous distance (well beyond
the Chicagoland market) to avoid the parking fee. The consequences of
such a move are unlikely to be worthwhile.
-
Parking fee revenues are intended to support high-quality transit service,
which in turn should help mitigate regional congestion. Some would
contend that congestion could be affected more directly if revenues were
Conclusion
140
used to support highway projects. However, roadway expansion is not a
reasonable alternative use for the revenues. Increased funding is not
enough to ensure that roadway construction keeps pace with the region's
rising traffic levels. Furthermore, exclusive expansion of roadway
infrastructure reinforces the auto-dependency of the region, resulting in
even fewer travel choices for many of its residents. In the long run,
capacity expansion has an induced travel response, resulting in
congestion levels either equivalent or higher than before. When roads and
transit are viewed as part of a larger transportation network, unbalanced
investment in the roadway component ultimately has costly consequences
for all parts of the network (both roadway and transit). Of course, this does
not mean that the parking fee revenues must be used exclusively for
transit operations. A portion can also be reserved for special mobility
initiatives throughout the region that help to support alternative
transportation options.
-
The parking fee should not be regarded as a means to directly alter travel
demand. Even in the very unlikely case that it is passed along to the
driver, the fee level will not be high enough to influence behavior. Rather,
this particular fee is primarily intended to provide funding for adequate and
sustainable transit options throughout the region. More aggressive
strategies would be both unpopular and ineffective if implemented before
the finance crisis is fully resolved. Ample and reliable transportation
alternatives must be firmly in place before undertaking any major travel
demand management efforts.
7.1.4 Understand the Actual Impacts: Incidence & Magnitude
Since the fee will be imposed directly on commercial real estate property,
landowners are likely to be one of the most vocal stakeholder groups. In order to
identify and counter inaccurate opposition claims, the RTA must have a thorough
understanding of the fee's incidence and magnitude. The parking fee will have a
variety of expected impacts depending on different property level conditions.
For instance, a commercial parking facility will likely perceive the additional fee
as a significant financial threat, especially if it must absorb the majority of the
cost. However, given the very small size of the fee in comparison with (1) the
high value of access provided by parking and (2) the large expense of the
existing tax, the fee would have a relatively modest impact on overall parking
rates.
However, such a direct shift of costs to the driver is less likely in the case of an
office or retail property. If the property owner finds it necessary to pass the costs
along, it must first be passed through the property tenant, generally in the form of
increased rents. Since the rent is only a portion of the tenant's overall financial
structure, the small increase should be relatively insignificant. In the unlikely
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141
event that fee-related costs eventually reach retail customers, they will generally
be lower than the costs incurred through even the most minimal sales tax
increases.
7.1.5 Prepare Logistical Strategies
Legal: The RTA must recognize that there may be legal challenges to
implementation, especially with a funding approach that has no precedent in the
US context. It is possible that opponents will try to characterize the fee as an
unconstitutional taking of property. In such a case, it will be the RTA's
responsibility to prove that the fee has rational nexus and rough proportionality
with the externalities of auto-dependent development. A potential method is to
demonstrate that commercial properties requiring greater drive-access impose
much larger societal costs. Given this argument, it is reasonable to establish a
mechanism through which real estate owners can at least partially pay for these
annual impacts on society. Furthermore, most of the proposed parking fee levels
are so low that they are equivalent to only a fraction of the estimated social costs,
thus satisfying any rough proportionality requirements.
Political:
Determining the method by which the new funds are distributed will be a highly
controversial process. The existing distribution procedure ignores the importance
of regional mobility measures and, if used for all funding, would not solve the
budget crisis. However, at this time, advocating complete revision of the existing
RTA formula may exacerbate regional tensions. The parking fee may never be
implemented if it is conditional upon formula revision.
An acceptable compromise may be to retain the existing RTA formula for sales
tax distribution and to develop a separate procedure for the new parking fee
revenue stream. If the majority of parking fee revenues was distributed based on
annual performance measurements (such as ridership or vehicle hours) there
would be a direct connection between funding levels and service levels. A
portion of the annual funding could also be reserved as an incentive for
demonstrated services improvements over previous years. Alternatively, a
portion of the funding could be reserved for special mobility enhancement
projects throughout the region. Qualifying initiatives need not be directly related
to transit, but should be designed to support non-auto-based travel. Such a direct
stake in the new funding source could attract support from parts of the region
with significantly less transit-accessibility.
To guarantee stability during this time of transition, it will be important to ensure
that all service boards receive at least as much as they have received in previous
years. While the existing funding process is not ideal, simultaneous changes in
the distribution formula may not be immediately achievable. Rather, it will be
would be wise to establish a brief trial period for the merit-based process. Once
there is a full understanding of how this will impact specific funding levels,
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142
additional steps can be taken. Both a timeline and exact procedures for this
staged implementation effort should be clearly outlined in an RTA amendment.
Institutional:
Assuming that the RTA administers the parking fee using a more merit-based
distribution formula, certain institutional changes will be necessary. The RTA
should be held responsible for regional mobility performance. Whereas the RTA
has previously had little interest in each service board's actual service levels, the
new distribution approach would require greater accountability. Amendments to
the RTA's governing statute will be necessary to reflect this added concern for
regional improvements. Each year, the RTA should be expected to produce a
progress report outlining how increased funding levels have actually impacted
service quality.
Ultimately, this new concern with performance could be a valid reason to update
other aspects of the RTA's administrative structure, including the composition of
the board. If the official aim of the RTA were to foster greater mobility throughout
the region, then it would make greater sense for board composition to be based
on ridership levels as well as population.
In order to build support for the parking fee initiative, the mechanics of
implementation should be as simple and inexpensive as possible. By requiring
property owners to submit simple annual parking supply updates, the
administrative costs can be kept to a minimum.
7.2
Regional Momentum: Beyond the First Steps
A regional parking fee is a very realistic funding option for the RTA given its
current political environment and immediate budget needs. It is a relatively
modest initiative that would have numerous long-run benefits for the region.
However, this does not mean that efforts to remedy existing structural flaws
should be completely abandoned. As long as intraregional tensions remain high,
any major restructurings will surely be met with passionate opposition. However,
the implementation of a uniform, modest parking fee across the region could
have the following impacts:
- Create a larger, more secure funding stream for all transit stakeholders, thus
reducing the sense that everyone is fighting for the same dollar
- Establish a distribution mechanism that is not governed by the divisive silo
mentality
It is possible that a more secure funding environment could foster greater
willingness to cooperate on previously controversial matters. The parking fee
should not be viewed as a replacement for more ambitious, long-term goals.
Rather, it can set the stage for greater levels of regional cooperation.
Regional Parking Fee
143
If the parking fee achieves its initial goals of (1) creating a larger revenue stream
and (2) fostering a more regional mentality with regards to transit, this does not
mean complete resolution of Chicagoland's transportation challenges. While
alternative transport choices will be secured, there is no guarantee that previous
ridership loss can be completely reversed. While the parking fee will stabilize
transit finances, thus ensuring that existing transport alternatives are sustained,
much more will be needed to actually reverse decades of transit decline.
Fortunately, the region will be in better position to attempt more innovative
measures. As discussed earlier, London's congestion charging policy was largely
successful because travelers had feasible transport alternatives. The long-term
combination of ample regional transportation options and real estate
development that is less oriented around automobile access could substantially
improve Chicagoland's congestion. However, this will require a sustained
commitment to steady increases in service performance, which will require future
increases in the parking fee.
7.3 Applicability to Other Transit Properties
Although it is a perfect solution for Chicagoland's current challenges, a similar
finance strategy can also be appropriate in a variety of different settings. Many
transit properties throughout the country could benefit from such a relatively
secure cash flow and should consider it as an alternative to more traditional
funding options. A parking fee initiative will have a greater likelihood of success
if:
-
The need for additional sources of dedicated funding is widely
recognized. It is much more difficult to build public support for a fee if few
actually believe that the region could benefit from transit budget increases.
-
Transit services are provided to a relatively large regional area.
Although this is not necessary, an extensive implementation area will
mean that significant revenues can be generated even if per space fees
are kept at a minimal level.
-
Highly visible, positive changes in service (in terms of both quality
and quantity) can be achieved within a relatively short time span. The
CTA's situation is unique (and certainly not enviable) in that severe
service cuts are guaranteed if additional funding is not immediately
identified. The specifics of this option have been widely publicized
throughout the region. If the parking fee successfully eliminates the need
for such unpopular service changes, it will be easy for the public to
perceive the connection between costs (the parking fee) and benefits (the
continuation of fundamental transit services). On the other hand, an
agency that is in a less desperate situation must be prepared to prove that
Conclusion
144
the implementation of a parking fee will yield perceptible benefits. This
could be in the form of significant service improvements such as more
frequent vehicle headways or extended operating hours. It could also
come in the form of lower fares, an extreme example of which was Perth's
elimination of all fares in the Central Business District.
A regional parking fee could be appropriate in the following cases:
7.3.1 Massachusetts Bay Transportation Authority (MBTA)
The MBTA, the provider of transit service for the Greater Boston Area, is
currently in search of ways to reduce a $10 million funding deficit. In addition to
common strategies such as fare increases and service reductions, it has also
considered less traditional options such as the installation of closed-circuit
televisions on rail vehicles (intended to generate advertising revenue). (Daniel,
2005) Persistent budget shortfalls are largely caused by its massive debt burden,
which is the highest in the country. Currently, the real impediments to expansion
are constraints on operations funding. The stable revenues from a parking fee
could enable the MBTA to enhance its service provision while still managing to
cover the expenses of operations and maintenance.
7.3.2 Transport for London (TfL)
Transport for London is the manager of both transit and roadway infrastructure
throughout the London area. In early 2003, it implemented a congestion
mitigation scheme that essentially charges a fee for all vehicles entering central
London. After two years of implementation, congestion levels in the target zone
are 30% lower than pre-charge levels (TfL press release, February 18, 2005).
While this was a primary goal of the policy, TfL had also expected that the charge
would generate approximately £130 million (approximately $239 million USD) in
annual revenues. However, the unexpectedly high cost of collecting the fees
meant that net revenues are lower. It became apparent that actual net revenues
would be approximately half of projections for the first year. (BBC, 2003) During
that year, fares were increased on both the subway and bus. (BBC, 2003) In
Summer 2005, the base congestion fee will be raised from E5 to E8. Such a
scheme can only be effective if transit service levels are high enough to handle
significant mode shift. With lower than expected revenues from congestion
charging, it is possible that there will not be enough funding to support necessary
transit service enhancements. A parking fee could complement the congestion
charge by generating additional transit revenues.
7.4
Future Research
7.4.1 Fees - How High is Too High?
This research focused on the case in which the parking fee is so low that it is
unlikely to have a direct impact on driver behavior. However, it is assumed that
Regional Parking Fee
145
increases in fee rates are likely to occur at some point in the future. Increases
that are simply designed to keep pace with inflation will remain relatively minimal.
However, substantial increases implemented for other reasons, such as higher
revenue or traffic demand management, could have significant impacts on
behavior. As discussed in Chapter 5, even modest fee levels have a large
enough impact on property owners that they might start to consider different
development patterns. A more in-depth exploration of this type of dynamic would
be useful.
7.4.2 Impact of Suburban Commercial Location
In Chapter 6, the societal costs imposed by greenfield business location were
quantified and compared with the modest parking fee levels. This is a potential
way to demonstrate the essential nexus and rough proportionality of the parking
fee. The Persky & Wiewel study upon which this analysis is based does not
necessarily include all of the potential costs. For instance, the worker expenses
of purchasing and maintaining a vehicle for commuting is a significant cost that
should also be considered. While I have attempted to determine the approximate
magnitude of additional automobile expenses, a more detailed analysis is
necessary.
Furthermore, the societal cost analysis does not necessarily address the fact that
commercial properties face a congestion impact fee from which residential
properties are automatically exempt. It could be argued that residential parking
spaces also contribute to regional congestion and that they should incur a similar
impact fee in addition to or in lieu of higher gas taxes. It is for this reason that an
analysis examining the social impact differentials between commercial and
residential developments would be worthwhile.
7.4.3 Explore the Impacts of Transportation Funding
In Chapter 4, there is a brief examination of the potential system-wide impacts of
increased transit funding versus the potential system-wide impacts of increased
roadway funding. It is shown that, at least in this simplified case, transit funding
results in travel cost reductions for everyone in the transportation system,
including both transit riders and auto drivers. However, funding for auto actually
increases costs for everyone in the system, regardless of mode. It would be
interesting to see if this is an accurate representation of complex, real-life
transportation systems. Additionally, what are the implications for regional
transportation finance policy?
7.4.4 Monitor Actual Impacts
In the case of actual implementation, it will be important to monitor impacts and
collect data so it can be used as a model for other transit authorities. Since this is
a relatively unique approach to transit operations finance, it would be valuable to
know if the hypotheses presented here are accurate. Since operations finance is
a serious concern for a number of transit agencies, it is likely that a successful
implementation in Chicagoland could inspire similar solutions elsewhere. As part
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146
of its new commitment to regional mobility, the RTA should be initiate the
collection of parking fee-related data, including:
-
Surveys of property level reactions
-
Annual reports on level and distribution of congestion
Annual reports on the impact of increased funding on regional mobility
levels
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Frequently Used Abbreviations
APTA: American Public Transportation Association
AAA: American Automobile Association
CTA: Chicago Transit Authority
FAR: Floor Area Ratio
Illinois FIRST: Illinois Fund for Infrastructure, Roads, Schools, and Transit
MBTA: Massachusetts Bay Transportation Authority
MIT: Massachusetts Institute of Technology
NOI: Net Operating Income
RTA: Regional Transportation Authority
TfL: Transport for London
TTI: Texas Transportation Institute
UMTA: Urban Mass Transportation Administration
VMT: Vehicle Miles Traveled
148
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Regional Parking Fee
153
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154
Appendices
Number Of Parking
Spaces
60
100
120
20
$8,900 $19,240
$29,580 $39,920 $50,260
$60,600
40
$7,460 $17,800
$28,140 $38,480 $48,820
$59,160
60
$6,020 $16,360
$26,700
$37,040 $47,380
$57,720
80
$4,580 $14,920
$25,260
$35,600 $45,940
56,280
100
$3,140 $13,480
$23,820
$34,160 $44,500
$54,840
120
$1,700 $12,040
$22,380 $32,720 $43,060
$53,400
140
$260 $10,600
$20,940
$31,280 $41,620
$51,960
160
($1,180)
$9,160 $19,500
$29,840 $40,180
$50,520
180
($2,620)
$7,720 $18,060
$28,400 $38,740
$49,080
200
($4,060)
$6,280 $16,620
$26,960 $37,300
$47,640
220
($5,500)
$4,840 $15,180
$25,520 $35,860
$46,200
240
($6,940)
$3,400 $13,740
$24,080 $34,420
$44,760
260
($8,380)
$1,960 $12,300
$22,640 $32,980
$43,320
280
($9,820)
$520
$10,860
$21,200 $31,540
$41,880
300 ($11,260)
($920)
9420
$19,760 $30,100
$40,440
320 ($12,700) ($2,360
7980
$18,320 $28,660
$39,000
340 ($14, 140) ($3,800
540 $16880 $27,220
$37,560
360 ($15,580) ($5,240
00 $15,440 $25,780
$36,120
380 ($17,020) ($6,680)
3660 $14,000
24,340
$34,680
$12,560 $22,900
$33,240
400 ($18,460) ($8,120)
$2,220
Appendix A: Comparison of parking fee charges with estimated societal
location.
Regional Parking Fee
140
$70,940
$69,500
$68,060
$66,620
$65,180
$63,740
$62,300
$60,860
$59,420
$57,980
$56,540
$55,100
$53,660
$52,220
$50,780
$49,340
$47,900
$46,460
$45,020
$43,580
impacts
200
180
160
$81,280 $91,620
$101,960
$79,840 $90,180 $100,520
$78,400 $88,740
$99,080
$76,960 $87,300
$97,640
$75,520 $85,860
$96,200
$74,080 $84,420
$94,760
$72,640 $82,980
$93,320
$71,200 $81,540
$91,880
$69,760 $80,100
$90,440
$68,320 $78,660
$89,000
$66,880 $77,220
$87,560
$65,440 $75,780
$86,120
$64,000 $74,340
$84,680
$62,560 $72,900
$83,240
$61,120 $71,460
$81,800
$59,680 $70,020
$80,360
$58,240 $68 580
$78,920
$56,800 $67,140
$77,480
$55,360
65,700
$76,040
$74,600
$53,920 $64,260
of commercial property greenfield
155
Number of
Parking
Spaces
11111,11111111pell
y T,7=
Will
MW
100
120
140
160
180
200
20
13.9%
7.0%
4.6%
3.5%
2.8%
2.3%
2.0%
1.7%
1.5%
1.4%
40
60
27.9%
41.8%
13.9%
20.9%
9.3%
13.9%
7.0%
10.4%
5.6%
8.4%
4.6%
7.0%
4.0%
6.0%
3.5%
5.2%
3.1%
4.6%
2.8%
4.2%
80
55.7%
27.9%
18.6%
13.9%
11.1%
9.3%
8.0%
7.0%
6.2%
5.6%
100
69.6%
34.8%
23.2%
17.4%
13.9%
11.6%
9.9%
8.7%
7.7%
7.0%
120
140
160
83.6%
97.5%
111.4%
41.8%
48.7%
27.9%
32.5%
37.1%
20.9%
24.4%
16.7%
19.5%
11.9%
13.9%
10.4%
12.2%
9.3%
10.8%
8.4%
9.7%
180
22.3%
25.1%
13.9%
16.2%
18.6%
20.9%
15.9%
17.9%
13.9%
15.7%
12.4%
13.9%
11.1%
12.5%
125.3%
55.7%
62.7%
41.8%
27.9%
31.3%
200
139.3%
69.6%
46.4%
34.8%
27.9%
23.2%
19.9%
17.4%
15.5%
13.9%
220
240
153.2%
167.1%
38.3%
41.8%
45.3%
19.1%
17.0%
15.3%
33.4%
36.2%
25.5%
27.9%
30.2%
21.9%
181.0%
51.1%
55.7%
60.3%
30.6%
260
76.6%
83.6%
90.5%
23.9%
25.9%
20.9%
22.6%
18.6%
20.1%
16.7%
18.1%
280
195.0%
97.5%
65.0%
48.7%
39.0%
32.5%
27.9%
24.4%
21.7%
19.5%
300
208.9%
104.4%
69.6%
52.2%
41.8%
34.8%
29.8%
26.1%
23.2%
20.9%
22.3%
320
222.8%
111.4%
74.3%
55.7%
44.6%
37.1%
31.8%
27.9%
24.8%
340
236.8%
118.4%
78.9%
59.2%
47.4%
39.5%
33.8%
29.6%
26.3%
23.7%
360
380
400
250.7%
264.6%
278.5%
125.3%
132.3%
139.3%
83.6%
88.2%
92.8%
62.7%
66.2%
69.6%
50.1%
52.9%
55.7%
41.8%
44.1%
46.4%
35.8%
37.8%
39.8%
31.3%
33.1%
34.8%
27.9%
29.4%
30.9%
25.1%
26.5%
27.9%
Appendix B: Percentage of societal impact costs that are covered by the parking fee.
Appendices
156